Asia Pacific logistics sector growth continues

With fundamentals propelling the adoption of e-commerce likely to persist beyond the outbreak, we believe that the sector is still in the early stages of maturity and is expected to enjoy an extended cycle of growth that is just beginning to assume momentum.

Diversifying supply chains

Trade tension made supply chain diversification critical, but the pandemic has highlighted resilience to be a more comprehensive goal.

The quest to reconfigure strategies to be more relevant in the new normal will result in sustained demand for modern logistics facilities, which function as critical pieces of real estate that keep the physical economy humming. Just to wrap our minds to the sheer scale of it, these exist across the entire global supply chain.

Ongoing supply chain disruptions

From extreme weather events and natural disasters to geopolitical tensions, the world’s supply chains remain vulnerable to potential disruption. T

he outbreak of the pandemic has underscored how delicately balanced these are and its critical role in maintaining macroeconomic stability. As e-commerce continues to gain a foothold in economies, supply chains are also becoming more globalised and complex.

The upshot is that traditional just-in-time models that once governed inventory management, prioritising cost efficiencies, are no longer viable, giving way to just-in-case strategies. Aside from the sustained adoption of e-commerce, the evolution of supply chain strategies will also drive long-term demand for logistics spaces.

Demand will remain high

Despite completion of close to 9 million sqm of supply, vacancies in the region are likely to remain on a tightening bias due to strong demand and active pre-leasing commitments.

With the pivot towards e-commerce occurring on a global scale and the network effects of supply chains, the synchronicity of factors will mean demand will stay elevated across the region in the mid-to-long term. These conditions will also reverberate across different classes of logistic facilities.

Despite economic uncertainty induced by a resurgent infection wave, logistics market rents were observed to have remained resilient in 2021 with the stay-at-home trend propelling e-commerce demand. As occupiers remain highly cost sensitive, rents in the logistics sector have historically not registered strong growth potential.

However, with access to land banks a constraint, supply is unlikely to keep up with growing demand. We expect rents to rise by 1-2% in 2022 with those in the region’s developed markets rising at a faster clip of 2-3%.

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