Industrial & logistics sector tops APAC investment preference in 2024

Steady rental growth and stable returns attract investors to logistics assets.

A recent report by CBRE reveals that the industrial and logistics sector is Asia Pacific’s top asset class for investment in 2024, ranking as either the first or second targeted asset class for the second consecutive year.

Michael Bowens, Managing Director, Head of Industrial & Logistics, Advisory & Transactions Services, CBRE Asia Pacific, attributes this strong interest to steady rental growth across major markets. 

"In most of the major markets, we see steady, healthy rental growth. And whilst that rental growth for logistics is set to normalise, there's still some time for investors to realise ample returns," he explained.

Popular destinations for capital deployment include Japan, Australia, and Singapore. In China, the logistics sector stands out amid the property slump, attracting attention from local insurers and domestic institutions due to stable returns and attractive yields.

While the Asia Pacific logistics market is experiencing a supply peak, vacancy levels vary significantly across different regions. Bowens pointed out, "Vacancy pressure is especially strong in Greater Seoul, where just 15% of the new stock that's come to market has already been pre-committed." In contrast, markets like Singapore and Australia have extremely tight vacancy rates, with figures between 1% to 2%.

The overall outlook for the industrial and logistics sector in Asia Pacific is reasonably healthy. Bowens noted that logistics expansion demand is normalising from pandemic levels, with stable occupier sentiment so far in 2024. 

"Some of the demand was hindered by capital expenditure controls and the appetite for expansion amongst industrial logistics occupiers. It should moderate a bit further in 2024 and 2025," he said.

According to CBRE's recent Industrial Occupier Survey, about 45% of industrial occupiers plan to increase their footprint, down from 56% last year. Despite this moderation, demand from the manufacturing sector, particularly high-tech manufacturers, electric vehicles, automobile parts, semiconductors, and renewable energy industries, is expected to offset any reduction in logistics demand. "Southeast Asia and India will be the key beneficiaries of that demand," Bowens emphasised.