You are the managing director of an investment management company specializing in logistics. Your company recently raised $500M USD targeting the Asia Pacific market. How would you allocate your investment across the region?
The logistics market which was already popular is now at the forefront of investors’ minds amidst accelerated e-commerce growth due to the pandemic. Investor interest in core logistics properties in tier 1 markets is at an all-time high and logistics cap rates are tightening across several tier 1 markets such as Singapore, Sydney, Seoul, Tokyo, Shanghai and Hong Kong.
Given that e-commerce is only going to grow in significance to the sector, I would position my portfolio (70% of funds) towards these core assets which are poised to appreciate in price and have stabilized cashflows. My investment focus would be on institutional-grade logistics properties especially those with strong tenancies, but it may be challenging to get attractive returns due to intense competition and ample liquidity in the region. I would leverage local relationships to source sale and leaseback opportunities.
My preferred markets would be China, Japan and South Korea which are densely populated with deep e-commerce and logistics markets. Despite its small domestic market, Singapore would be another market to watch, given an undersupply of prime logistics space, stable e-commerce growth, extensive infrastructure and a stable Singapore dollar.
For the remaining 30% of funds, I would add exposure to value-add and development opportunities at high growth markets such as Ho Chi Minh City, Malaysia and tier 1 cities in India. I would be open to cold storage logistics opportunities as it is a fast-growing market, driven by higher online grocery sales. However, I would be selective as this sector is capital intensive and requires deep expertise. I would prefer to go into joint ventures with a local partner for exposure in this sector.
These opinions are the author’s own and do not necessarily reflect the views of Cushman & Wakefield. To find out more about how Dennis Yeo v