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Demand for warehouses and industrial real estate continues to increase due to the e-commerce boom

The warehouse was a real estate market that was very hot before the pandemic due to the explosion of e-commerce, and now there is no sign of cooling off.
According to JLL, industrial real estate and logistics account for 20% of global transaction volume in 2020, up from 10% in 2010.
“Demand for logistics real estate has not decreased, either from the investor or the owner side,” said Stuart Crow, CEO of capital markets in Asia-Pacific at JLL. Increasingly, we see more and more opportunities for investors to expand their reach in logistics, especially in markets like Australia ”.
Real estate logistics is a core element of Australia’s biggest ever real estate deal. In April 2021, ESR Australia – backed by Singapore government investment fund GIC – purchased a portfolio of 45 properties for A $ 3.8 billion ($ 2.9 billion). US) from Blackstone Fund Management Group of America.
Blackstone is also a pioneer in other recent major industrial real estate deals. In 2019, Blackstone acquired from US investment group GLP a volume of real estate worth up to $ 18.7 billion, thereby nearly doubling its industrial portfolio. . This is also the largest private real estate deal ever in the US.
In 2017, Blackstone sold Europe’s largest logistics company Logicor, consisting of 630 distribution centers in over 17 European countries, to a member of China Investment Corporation for € 12.25 billion ($ 13.8 billion). US Dollar). It was also the largest real estate deal in Europe at that time.
Investors are increasingly interested in logistics real estate due to the shift to online retail. According to Statista, global e-commerce sales increased 25% by 2020 to $ 2.43 trillion. By 2021, sales are expected to increase by $ 286 billion.
“COVID-19 has increased demand for industrial and logistics real estate to new heights,” said Matthew Lee, Senior Director at JLL Australia. “Importantly, there is not enough supply to meet all needs and now businesses are lining up to enter this market.”
Supply shortage
In Australia, 2 million square meters of warehouse space will be built in 2020 – the most since 2008. However, this is still not enough to meet growing demand, as total usable area reaches a high level. Continuity in 2020 is 2.86 million square meters. Demand for space continued to increase in the first quarter of 2021 with quarterly usable area reaching a new peak of 1.1 million square meters, amid a still extremely tight new supply.
Sam Butler, senior analyst for industrial real estate at JLL, said: “Developers halted new supply to the market in the middle of last year. Meanwhile, the time to build warehouses usually lasts from 6 to 12 months, so the supply is less and less ”.
In markets in Asia Pacific, JLL expects 94 million square feet of industrial space to be built by 2021, a 26% increase from the previous year. In the last quarter of 2020, the vacancy rate of this market stood at 11.4%. In Europe, vacancy rates are at a record low, below 5%. Globally, this figure is only 7.4%.
“The transition from physical retail to online and the need to stock up to mitigate supply chain bottlenecks caused by the pandemic is making land supplies for industrial and warehouse real estate more,” Lee said. lack of money, significantly affecting the operating model of logistics services companies, ”Lee said.
To regulate, these companies are thinking about longer-term strategies for their operations and locations.
“We’re at a point where logistics companies will be forced to accept what the market has to offer to keep business,” Lee said. Some companies may consider signing up-front leases with future buildings, but it will also cost time and money when they have to pay extra for short-term rental of storage space. another place in the meantime ”.

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