Our North America panel
David Gilbert CEO/CIO, Clarion Partners
Ed Lerum Portfolio manager, NBIM
Steve McCarthy Head of North America, AXA IM Alts
How did 2020 compare with pre-covid expectations for logistics in North America?
DG: Although the pandemic hit some real estate property sectors hard, the logistics and warehouse sector has weathered the downturn well, supported by surging e-commerce sales. The overall supply and demand fundamentals and total returns in 2020 are similar to our expectations pre-covid.
SM: From an acquisitions perspective, we got off to a slow start in Q1 due to the covid-19 outbreak, but ended the year ahead of budget, completing several industrial and office transactions – including the acquisition of an $875 million US logistics portfolio acquired from Cabot Properties. In terms of dispositions, we executed successful sales on behalf of our clients by offering high quality, stabilized office and multifamily assets to core buyers.
EL: With the exception of a few individual cities, the overall US logistics market ended 2020 within the range of pre-covid expectations as it relates to valuations, rental rates and occupancy levels. Expectations were largely met because of strong momentum in the second half of 2020, setting up 2021 for better than pre-covid expectations.
What is the main lesson from 2020?
SM: You never know when a black swan will appear, but there is always opportunity in a volatile market if you are disciplined, work hard and represent the right kind of capital.
EL: E-commerce’s positive and long-term impact on logistics real estate. Although e-commerce has grown at a keen pace over the past decade, 2020 has shown that the runway for future growth in e-commerce remains vast.
DG: People say, “don’t fight the Fed,” and it is so true. Central banks and governments took swift and decisive actions in early 2020 to help the economy and the financial markets, and prevented a potential depression scenario.
What logistics issues are keeping you awake at night amid the current uncertainty?
EL: With many new investors entering the space, will pricing remain appealing?
DG: New supply is always a risk, although it is increasingly difficult to develop distribution facilities or warehouses in infill locations that are close to population centers and labor pools.
SM: Nothing tonight, but eventually the advent of significant new supply.
Which logistics market will see the most interest in 2021?
DG: Among the US logistics markets, we remain bullish on ‘last-mile’ distribution investment opportunities in major metros/large distribution hubs (New York/New Jersey, Southern California, Seattle and Dallas) as well as in faster-growing secondary markets (Orlando, Las Vegas, Portland and Austin).
SM: Any major market demonstrating continued prospects for population and employment growth.
EL: As has been the case, high supply barrier locations will likely continue to see the most interest in 2021.
What do you think is coming next for logistics?
SM: Steady market fundamentals and low cap rates as investor demand remains strong for this ‘winning’ property type.
DG: We believe that the shifting consumer shopping preference and the ongoing transformation in the logistics industry are only halfway through globally. There are plenty of opportunities to develop and invest in logistics real estate.
EL: Once the economy opens up, what will be the new baseline for e-commerce penetration rates and the going forward growth rate? Both factors are uncertain and will have significant impact on future demand.
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