Global investors favour logistics
The logistics sector is the top pick for global institutions looking to increase their commercial property exposure in the Asia Pacific region this year, according to a survey of investors controlling a combined $2.5 trillion in funds.
Some 81 per cent of respondents plan on increasing investment in logistics by the end of 2021, as the sector proved resilient through the pandemic with growing demand from the e-commerce and grocery industries, according to a JLL survey of 38 investment houses.
The disruption caused by the coronavirus bolstered existing investment themes. Also in the top three sectors for increased investment are build-to-rent, favoured by 58 per cent, and alternatives, picked by 44 per cent.
Build-to-rent, a well-established asset class in North America and Europe where it is known as multi-family, is still a relatively small sector in the Asia-Pacific region outside Japan. It is emerging in Australia, along with South Korea and China. Alternative real estate includes data centres, purpose-built student accommodation, as well as health and aged care assets.
Tony Iuliano, JLL’s head of capital markets for industrial and logistics in Australia, said e-commerce penetration in this country had accelerated through the COVID-19 pandemic and had the potential to increase further.
“The delivery and storage of these goods is one of the ingredients supporting occupier demand for industrial and logistics facilities,” he said.
“One of the challenges for investors wanting exposure to the Australian industrial and logistics sector is the size of the investable universe.
“We estimate the investable universe is approximately $90 billion and most investors in the sector are looking to build a portfolio of between $1 billion and $1.5 billion.”
Major investment commitments announced in the last week underscore the appetite for the industrial sector. Reporting its annual result, fund manager Charter Hall revealed it had raised a further $1.25 billion for its largest unlisted industrial fund since the start of fiscal 2021.
“COVID-19 has seen accelerating demand for access to industrial and logistics assets, something we have actively pivoted towards,” managing director David Harrison said.
As well, industrial investment house, LOGOS, backed by Singapore’s Ara Assert Management, struck a series of local deals including the $170 million acquisition of Sigma facilities before winning a mandate from a large global investor to create a $350 million portfolio of industrial developments in Vietnam.
“Structural change has begun,” LOGOS co-founder Trent Iliffe told The Australian Financial Review.
Safe haven investing also featured strongly in the JLL survey. Around 56 per cent of respondents plan to increase their exposure to Japan by the end of 2021. Mainland China followed by Australia, South Korea and Singapore were also favoured by fund managers. Only 4 per cent of respondents planned to increase their exposure to Hong Kong’s property market.
Across the Asia-Pacific market, transaction volumes totalled nearly $74 billion in the first six months of the year, down 43 per cent on last year. Most survey respondents expect volumes to continue to trend down this half but to recover in the first half of 2021. Almost 90 per cent of survey respondents expect their 2020 total returns to be lower than the returns achieved in 2019.
