SINGAPORE, 17 June 2019
– Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services, today released the Glimpsing the Road Ahead: Reshaping the Logistics Market report
, offering a panorama of the Asia logistics property market profiling key players, shifting trends and top markets in Asia.
David Faulkner, Managing Director of Valuation & Advisory Services, Asia, at Colliers commented: “Consumer expectations, technological breakthroughs and rapid development in e-commerce have reshaped the landscape of logistics systems in Asia and are blurring the traditional market roles. The continued demand for logistics space and labour is redefining how warehouses are being built today.”
Institutional investors have been the most active group in the logistics property transactions since 2016. In particular, the net acquisition volume of warehouse properties in Asia by institutional investors in 2018 was 8.9x the level of 2017, according to Real Capital Analytics. They demand scale and geographic diversification and are often interested in new markets.
New business models
“The logistics business is largely driven and shaped by e-commerce which involves various categories of providers and services. However, in recent years disruptive businesses such as Amazon, JD.com, and many others have blurred market roles. These business models simplify operations and eliminate significant labour costs associated with traditional logistics industry,” Stephanie Sun, Director of Research, Asia at Colliers, explained.
Technology powers productivity
The logistics sector is under acute and growing pressure to deliver a better-quality service at ever lower cost. Technology is being harnessed to bridge the gap. Many instances of how AI is improving logistics are already in place. Other technology innovations including cloud solutions, supply chain financing, blockchain and automated solutions in the warehouse have also been deployed in the logistics sector to enhance productivity and minimise risk of processing errors.
Top Logistics Markets in Asia
Tokyo: ranked 5th globally and 1st in Asia on the World Bank’s 2018 Logistics Performance Index (LPI) for its high grades in customs, infrastructure and logistics competence, the city’s overall rent is likely to grow moderately given the outlook for firm demand but ample new supply.
Singapore: a world class logistics hub, the city is ranked 7th globally and 2nd in Asia on the World Bank’s 2018 LPI. The rapid growth in e-commerce demand for business to consumer deliveries of retail purchases represents an opportunity for the logistics market to grow further.
Hong Kong: the city is ranked 12th globally and 3rd in Asia on the World Bank’s 2018 LPI. We expect prices for Hong Kong logistics properties to grow by 8.4% in 2019 and continue to rise until 2022, reflecting the lack of new supply and the government’s revitalisation scheme.
Greater Seoul: Over the next five years, we believe logistics property rents in greater Seoul will rise firmly with yields at around 6-7%. Cities west and south-west of Seoul are drawing investors’ attention.
China: The key emerging trend in China is the increase in the number of front distribution centres (FDC) and mini-FDCs. Due to the scarcity of available warehouses and land supply for the logistics sector in Tier 1 cities, the very strong demand for logistics space is spilling over into adjoining or surrounding cities and markets.
“Asia logistics property investment remains attractive with yields ranging between 4.3% and 6.1% in Q1 2019. We expect the sector to continue to perform well in 2019 with rents and capital values rising further. However, tradable logistics assets in mature markets are scarce and investors may need to search for assets in emerging markets such as non-Tier 1 Chinese cities and cities near Seoul,” explained Mr. Faulkner.