Our APAC panel
Chua Tiow Chye Deputy group CEO, Mapletree Investments
Derek Ng Head of capital markets, New Ease
Jimmy Phua Managing director and head of real estate investments, Asia, CPP Investments
Claire Tang Co-CIO, head of Greater China, LaSalle
How did 2020 compare with pre-covid expectations for logistics in Asia-Pacific?
CTC: The logistics sector has shown relatively resilient growth over the past year and logistics real estate space continues to see strong demand in APAC. Demand for logistics space continues to be buoyed by an accelerated growth in e-commerce and certain industries serving essential daily needs such as supermarkets and healthcare, which compensated for negative demand impacts from the covid-19 pandemic.
CT: The demand for quicker and more accurate deliveries has only intensified the demand for logistics facilities, particularly for infill locations to be close to consumers. Logistics real estate is certainly a winner in a post-covid world. Not only have the demand drivers improved, but we also see capital rotation towards the asset class enhancing overall liquidity.
DN: New site acquisition and construction progress has been delayed but for key projects that are invested and approved, the overall process has been quicker as the local government has shown more support.
JP: The sector did as well as – and, in several instances, better than – pre-covid expectations. This is particularly true of facilities that catered for last-mile or fresh delivery given increased consumption online of such items.
What is the main lesson from 2020?
JP: A key lesson is that the external environment can change very quickly – hence the need to be vigilant and forward thinking in all sectors, including logistics.
CT: We have observed that investors lean towards resilient strategies and markets that are less impacted by the geopolitical situation. The logistics sector is a good example of such investment opportunity, especially in China, where domestic consumption has contributed to the overall performance of the logistics sector.
DN: Focus on better location as demand is more resilient. Property management is an area that we have improved a lot.
CTC: Covid-19 has underscored the importance of diversification (by geographies, customers, etc) as a risk mitigation strategy, both for the occupiers and asset owners. In addition, having the flexibility and quick adaptability in customer management as well as having well designed and good specification warehouse properties are also key contributory factors.
What logistics issues keep you awake at night?
JP: Unrealistic expectations caused by the increasing wall of capital chasing logistic facilities and the resulting supply pipeline.
CTC: How do we ensure that our business/warehouses remain open through the pandemic, including keeping our tenants, staff and properties clean and safe? In addition, how can we future proof our assets to meet the evolving demands of customers as covid-19 has accelerated e-commerce and warehouse automation that favor modern logistics facilities? Lastly, the ability to find and create value for investment assets amidst continuous cap rate compression.
CT: Strong investor demand for logistics facilities has been driving up pricing, particularly on stabilized assets with a good income profile. However, the good news is that this will improve the exit buyer pool for logistics development and value-add strategies.
Which logistics market will see the most interest in 2021?
CT: The more established and liquid logistics markets, including China, Japan, Korea and Australia will continue to be the main focus for institutional investors looking to gain exposure to the sector.
DN: Tier 1 and 1.5 cities in China
JP: Practically all markets in APAC. Interest in China is likely to remain strong but those markets that may emerge as manufacturing substitutes to China, such as India, Indonesia and Vietnam, are likely to see increased levels of investment.
CTC: In APAC developing markets, China, with a greater emphasis on domestic production and consumption, will continue to underpin the demand for logistics that was driven primarily by e-commerce previously. We have already seen how demand for warehouses in Tier 3 cities grew the fastest in China in 2020. Furthermore, we believe that as a result of the “China Plus” strategy, in South-East Asia, Vietnam and Malaysia will be beneficiaries. We are also keen on the long-term potential of the India market.
What’s next for logistics?
CT: The increasing adoption of online grocery shopping in the region is expected to raise the demand for cold storage facilities. We will also continue to see a growing trend of automation within logistics.
DN: E-commerce remains as the key trend. In addition, you will have cold-chain and medical supplies.
JP: Rapid expansion of the sector in APAC in the short to medium term. In addition, there is likely to be interest in more niche sectors of logistics, such as cold storage, given increased levels of food delivery. Some facilities in Asia may also be re-purposed for data center usage.
CTC: The sector will continue to experience a higher adoption of e-commerce, warehouse automation and growing demand for cold storage facilities due to pharmaceutical and food hygiene requirements. In addition, the advancement of technology in the e-commerce space such as the mass deployment of automated retrieval systems, digitalization of logistics park management, drone delivery, EV trucks, robots, unmanned delivery and blockchain-enabled tracking and same-day delivery services will benefit the overall logistics sector. As evidenced in the current distribution of covid-19 vaccines globally, secure, reliable and efficient supply chain management is core to delivering the necessary goods to the end-users on time and in good condition.