Logistics real estate a hit as APG, GIC and AIA partner specialised firms
Logistics real estate in China, Japan, and Europe is set to see higher inflows as asset owners such as AIA Group, GIC and APG signed strategic partnerships with logistics companies and investment platforms.
Last Wednesday (August 25), Hong Kong-based Insurance giant AIA Group and Singapore-based logistics company GLP announced the forming of a strategic investment partnership to invest in global logistics real estate assets and related opportunities.
A joint news release by the two partners stated that trends powering the growth of the global logistics real estate sector will “provide AIA with immense opportunities to diversify its investment portfolio and enhance returns for its customers and shareholders [by leveraging] GLP’s investment experience and expertise in this area.”
AIA had total assets worth $330 billion as of 30 June 2021.
Meanwhile, Hong Kong-listed logistics investment platform ESR announced the creation of a China logistics development fund on August 16, confirming capital commitments from Singapore sovereign wealth fund GIC as well as Dutch pension fund manager APG Asset Management, of up to $4 billion in investment capacity.
The fund, called ESR China Development Platform, will invest in warehouses and warehouse/industrial mixed-use properties that will be sourced, developed, and managed by ESR.
ESR’s AUM was at $36.3 billion, up 36.9% year-on-year, as of the first half this year. As of end 2020, APG had total assets worth €573 billion ($679 billion). The net asset value of its strategic and tactical real estate investments stood at €43.4 billion.
REAL ESTATE SHIFT
“Asia has historically been more focused on traditional commercial real estate assets, but in recent years there has been greater focus from both public and private real estate investors on alternatives such as logistics, data centres, and business parks,” Koh Shern Ling, portfolio manager for Principal Real Estate Investors, told AsianInvestor.
“We have seen strong interest and participation from insurance companies globally across all products and have seen a noticeable increase in insurance investor participation for our income strategies in China, Japan, and Europe, as these investors see long-term, stable, and resilient income with low volatility,” Craig A. Duffy, managing director of fund management at GLP, told AsianInvestor.
GLP has raised more than $4.7 billion in capital for new and existing logistics fund strategies across Apac, Europe, and the Americas year-to-date. Its global real estate AUM stood at $90 billion.
This April, ESR and GIC also established a new partnership to acquire Australia’s Milestone Logistics from Blackstone for A$3.8 billion ($2.8 billion).
Last April, ESR, APG, and Canada Pension Plan Investment Board (CPPIB) announced a strategic agreement for establishing a new development joint venture called ESR-KS II, with an equity allocation of $1 billion, to boost investments in South Korean logistics real estate.
ALSO READ: Institutional investors gravitate to logistics real estate in Asia
ROOM FOR GROWTH
Following the latest news concerning e-commerce and tech giants in China, some experts are becoming wary of the developments in the logistics sector.
“If you look at logistics and warehouses in China, there has been concerns about over-supply even before the latest regulatory crackdown on e-commerce players,” Koh said. “Nevertheless, China is a large market. There are also many regions where supply remains tight, especially in higher tier cities – and demand should continue to grow with the government’s focus on domestic circulation, so there are still ample opportunities to generate good returns,” he added.
According to a McKinsey report in May, while the pandemic has accelerated the growth of global logistics, it has also widened the gap between the sector’s leaders and stragglers. The market is becoming more dynamic as well, with many new start-ups providing increasingly intense competition.
This is especially true of the Asia market, where all indicators point to the continent’s recovery outpacing the rest of the world’s within the next year. The continent is expected to account for 57.3% of the growth of the global e-commerce logistics market from 2020 to 2025.
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