Asia Pacific logistics sector: increasingly varied sector requires multiple approaches

  • Relative to their populations, Australian cities are the best-served in APAC by logistics facilities, with 2.2-3.1 sq metres of Grade A warehouse space per capita
  • In Japan, old logistics stock makes up over 90% of the total. Greater Tokyo and greater Osaka have only 0.4 and 0.2 sq metres of total warehouse space per capita
  • Warehouses in Singapore and the small modern Japanese clusters have up to five storeys and floorplates of up to 100,000 sq metres. In contrast, most warehouses in Australia and India have one storey and floorplates of under 17,000 sq metres
  • The newest logistics clusters in APAC have warehouses with an average age of 2-4 years. In other markets the average age can be well over 10 years
  • Cold chain is a major new growth driver in the sector. Logistics markets with high cold chain warehouse stock include Singapore, West China (Chengdu) and Australia

 

Hong Kong, 15 October 2020Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services, today released the New Directions in Asia Pacific Logistics report, which asks which logistics markets offer the best long-run development opportunities; which are best positioned in terms of location and specifications; which should benefit the most from growth in cold storage; and which markets offer investors the highest rent growth and yield.

CK Lau, Managing Director, Valuation & Advisory Services, Asia, commented: “Across Asia Pacific, demand for logistics space has been supported by a long-run shift from physical to online retailing. COVID-19 has driven up e-commerce volumes sharply, while expansion in the cold chain sector and new infrastructure developments should boost demand further. Investors and developers already see logistics and warehouses as a core asset class.”

Andrew Haskins, Executive Director, Research, Asia, commented: “Logistics markets across Asia Pacific vary by stock, specifications and outlook. Australian cities stand out as the best-served in the region by modern logistics stock, while Japanese markets stand out as the most underserved; however, the small modern logistics clusters in Japan have very high specifications.”

Colliers expects demand from occupiers for logistics space, and from investors and developers for logistics assets, to stay firm across Asia Pacific over the next five years. However, given wide variations by market, participants in APAC logistics markets require different approaches:

  • With firm demand and limited supply in China’s Tier 1 cities, tenants and owners may have to seek space and opportunities in locations away from the main centres.
  • Japan stands out as an underserved market. Given low availability of modern units, investors and developers may apply value-add strategies to older stock. It is increasingly common to demolish and rebuild.
  • Looking ahead, we expect that big purpose-built cold chain warehouses will be built near ports and transport hubs, while renovated cold chain warehouses will be located nearer cities for easy distribution. Occupiers and owners will find opportunities in both types.
  • Australia has ample logistics stock, but it is tightly held and vacancy rates are well below their long-run averages. Investors should be willing to buy a portfolio of assets to achieve scale.

Click here to download the New Directions in Asia Pacific Logistics report.