Logistics real estate – a growing market with strong potential
Several factors are converging to drive the expansion of the logistics real estate market around the globe, and this growth is creating attractive investment opportunities for investors seeking robust risk-adjusted returns. The primary factor is the continuing rise of e-commerce, a major contributor to demand for logistics properties, and this combined with a global scarcity of prime logistics space means the ingredients are present for investments in this segment to prosper.
Prior to the COVID-19 outbreak, Goldman Sachs Research’s growth forecast for e-commerce was strong, with 14% average annual growth through 2022 predicted for that sector in the United States. Once the post-outbreak dust began to settle, explosive lockdown-driven growth saw this forecast revised upward to 22%.1 E-commerce sales growth in Asia-Pacific is forecast to be even higher, while Western Europe rounds out the top three regions for e-commerce expansion. Globally, retail e-commerce sales are projected to rocket from USD 3.53 tn in 2019 to a staggering USD 6.54 tn in 2022, representing an 85% rise over that period.2
The link between growth in online shopping and the expansion of logistics real estate is rather straightforward. Besides better prices, consumers expect their e-commerce experience to deliver convenience. When choosing online retailers, shoppers also consider the delivery options offered, return policy, and delivery speed.3 To satisfy these expectations, third-party logistics providers and online retailers are faced with the imperative of seeking out suitable locations for e-fulfilment centers and high-quality last-mile facilities located near major urban centers.
Crucially, online retailers require around three times the logistics space that traditional retailers occupy.