Industrial and logistics (I&L) REITs in the Pacific Rim played an added-value and strategic role in multi-asset portfolios, according to our new analysis published in the Journal of Property Investment & Finance.
E-commerce is driving an increased level of industrial and logistics property space demands. This trend has been amplified by the covid-19 pandemic. To accommodate increasing I&L property demand, I&L REITs have recently enhanced their property portfolios, often replacing the traditional industrial properties with logistic properties to gain strategic exposure to recent e-commerce trends.
An omnichannel retail platform strategy and a dynamic supply chain ecosystem with high digital technologies have been employed by e-retailers (e.g. Amazon, eBay, Alibaba) to meet the rapid growth of e-commerce activities.
These high-tech advances, including the use of smart devices (e.g. laptops, tablets, smartphones, smart TV) and social media platforms (e.g. Facebook, Twitter, Instagram, YouTube), have driven online shoppers to demand faster and more frequent delivery (just-in-time aka JIT procedures). In doing so, increasing I&L property space demands (e.g. third-party logistics aka 3PL, food and beverage, building supplies, consumer goods) are expected. To accommodate increasing I&L property space demand, logistics properties have taken on increased levels in I&L REIT portfolios (e.g. Goodman, Ascendas REIT), replacing the traditional style of industrial properties. For example, Goodman group increased the logistics property exposure in its property portfolio from 78% in 2007 to 94% in 2018.
Key I&L REIT players
Four of the top five global I&L REITs are in the Pacific Rim region. In particular, the region constituted 89.0% of the total global market capitalisation of I&L REITs in 2018, including the US (US$79.0bn), Japan (US$14.7bn), Australia (US$14.9bn) and Singapore (US$15.9bn). Strong growth of I&L REITs has been evident in the Pacific Rim region. The size of I&L REITs in the region increased from US$34.8bn in July 2011 to US$124.5bn in December 2018, with an increase of 3.6 times over this period.