Private equity and institutional investors are driving investment in new logistics facilities across Asia on the growing shift toward online retail sales even as freight forwarders and manufacturers grapple with a shortage of modern facilities.
That comes as demand for distribution centers and warehouses is set to climb as firms reappraise supply chains, increase inventories, and diversify into other countries after the disruption caused by the global COVID-19 pandemic.
“Demand for logistics space continues to outpace supply in Asia where consumer demand for e-commerce is growing much faster than the logistics infrastructure supporting it,” Craig Duffy, managing director of Singapore-headquartered logistics investment company GLP, told JOC.com. “We expect this trend to continue accelerating investment activity in the sector over the next few years.”
Highlighting the pace of investment, more than $4 billion has been poured into Asia-based logistics development funds in the last few months.
GLP recently closed its GLP China Income Fund 1, which raised $2.1 billion from seven investors to invest in a portfolio of 34 logistics facilities in China.
Other investors include LaSalle Investment Management, which raised more than $680 million for its first dedicated China logistics investment vehicle, and US-based investment trust Prologis, which secured $1.4 billion in extra investment for a China-focused logistics fund.
“GLP is also in active discussions with several investors for other fund strategies related to logistics real estate as well as a private equity strategy focused on logistics technology,” Duffy said.
GLP, which is a 40 percent shareholder in Hong Kong’s Li & Fung trading and logistics group, is also looking to establish a private Japan income fund later this year to invest in logistics properties. Currently, China, Japan, and India are GLP’s biggest markets for logistics facilities, although the company is eyeing developments elsewhere in the region.
“Within Southeast Asia, we think Vietnam and Indonesia are among the most attractive markets given their population dynamics and growing economy, which will support domestic consumption,” Duffy said.
Developers lured by steady returns
Michael Fenton, head of industrial at real estate company JLL in Australia, said developers of modern logistics facilities are lured by steady returns with yields of ranging from 4 percent in Japan and 7 to 9 percent in India, Indonesia, and Vietnam.
Indonesia state-owned firm Kawasan Industri Wijayakusuma unveiled plans in mid-June for a 9,900-acre logistics park in central Java, about 170 miles from the country’s main port at Tanjung Priok, specifically to target multinational firms relocating out of China.
Investor interest in the logistics sector has also benefited carriers including Maersk, which opened its 118,403-square-foot Bac Ninh logistics center about 75 miles from Vietnam’s Hai Phong Port in December. The complex is part of a logistics park developed by Singapore investment company, Mapletree Logistics Trust, which spent about $550 million earlier this year investing in facilities in Vietnam, South Korea, China, Japan, and Malaysia. The firm currently has about 130 developments across Asia involving logistics companies CWT, Nippon Express, and XPO Worldwide Logistics.
“We see the adoption of online retail continuing to accelerate,” Duffy said of the potential for logistics facilities in Asia. “The disruptions caused by COVID-19 have become a catalyst for companies to reconfigure their supply chain strategies to balance efficiency with resilience.”
US business advisory firm Forrester Analytics estimated that cross-border e-commerce sales in Asia are set to surge to $389.5 billion by 2023, up from $181.4 billion in 2018.
“Post-COVID, we anticipate companies to maintain higher inventory levels which will increase demand for warehouses and demand for logistics services and facilities globally,” Duffy said.
Contact Keith Wallis at Keithwallis@hotmail.com.