Strong long-term drivers underpin a positive outlook for the Industrial sector in Asia despite uncertainty in the near-term macroeconomic climate. REITs in Asia demonstrated relative resilience through the peak COVID-19 period, backed by robust capital structures, sufficient financial liquidity, and supportive regulatory policies. A Cushman & Wakefield report revealed that all classes gained overall momentum to recover strongly during 2021, when the annualised total return rate of REITs of each property type turned from negative to positive. Industrial/logistics REITs, which recorded positive returns throughout, recorded annualised total returns of 24.7% in 2021, compared to hotels and retail––investment classes most closely associated with social distancing––which recorded 9.4% and 9.8% respectively. Buoyed by the unprecedented growth in ecommerce during the past three years, industrial/logistics REITs recorded the highest 10-year annualised total returns of any asset class, at 16.4% (see table).
Catherine Chen, Director, APAC Research said industrial/logistics REITs have seen a wave of capitalisation as investors turn to the new economy. “Changes in economic activity have undeniably brought unprecedented challenges to traditional real estate sectors, such as office properties and shopping malls. On the other hand, the surge of activity in the new economy has brought alternative property types such as logistics parks and data centres to the centre of investors’ attention.”
Solid long-term drivers mean new economy REITs are likely to remain resilient even as the pandemic subsides. Asia’s growing middle class, the largest online retail market in the world and increasing intra-regional trade all point to increased industrial activity. Even near-term uncertainties in the macroeconomic environment could potentially increase demand for logistics assets in the region, as operators accumulate reserves of warehouse space to hedge against supply chain disruption. But growth is not a given, as changes in manufacturing and technology mean greater demand for higher-spec assets.
The best performing REITs will be those that continually improve their properties, said Dennis Yeo, Head of Investor Services and Logistics & Industrial, APAC: “Industrial facilities now need to be different from facilities 10 years ago. If logistics operators are using drones and autonomous vehicles for deliveries, facilities need homing devices and charging points. REITs must continue to regenerate their portfolios, either through investing in technology or through disposal and acquisition.”
