COVID-19 has influenced both the investment flow and leasing demand of logistics in the region, with uncertainty around underwriting assumptions, including rent and vacancy forecasts, costs of capital, travel restrictions, and lack of pricing visibility, leading to a 32 per cent decline year-on-year in first half of 2020. Inflow of capital into logistics has resulted in more complex transactions and greater participation by both established and new investors into the sector, which we expect to continue. Logistics remain firmly on the radar of investors and although a moderation in deal activity has been observed, recent signs show the market becoming increasingly sophisticated.
an increasing trend towards acquiring logistics platforms rather than individual assets. Investors gain captive tenant networks and achieve scale quickly through this sophisticated transaction route. Platform acquisitions, potentially via mergers or privatizations, also provide additional ways to access and expand into the logistics sector. World’s largest investors are investing more into logistics real estate. Additionally, a sizeable portion of new supply is large-scale modern logistics assets of institutional grade, which are expected to draw more institutional capital. Growth in values is likely to slow between 2020 and 2023, investors’ confidence in the structural drivers for the logistics sector is expected to remain intact. Capital values are forecast to stay relatively firm, with modest yield compression expected in some markets across the region. Pandemic will accelerate trends already in play across the sector, such as increased internet penetration rates, expansion of online grocery, omnichannel retailing and the integration of technology into logistics and warehousing. However, led by occupier and investor commitments, the sector is well placed to respond to the post-COVID-19 recovery.