Logistics. Logically.

The market for logistics properties is undergoing a significant and sustained period of global expansion. Spurred by changes in consumption patterns and technological progress, growth in the logistics real estate market presents investors with opportunities for strong risk-adjusted returns and portfolio diversification.

March 25, 2021

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.

Changes in consumer behavior

Considerations in choosing an online retailer (% of survey respondents)

E-commerce requires three times the warehouse space of traditional retailers, while consumers increasingly expect faster shipping, creating strong demand for well-located assets.

Source: Prologis research

Sentiment is strong

This demand for quality logistics space in conditions of relative scarcity has led to a generally bullish outlook for the sector’s prospects. In one recent survey involving 16 managers of logistics properties, 75% expected rental prices for logistics properties to increase in the next three years. Nearly half of those surveyed are planning to increase their purchases of logistics real estate properties over that same period.4

The high expectations of logistic real estate sector investors are already being borne out in the most recent data. From Q1 2020 to Q2 2020, e-commerce retailers in the US increased their volume of leased industrial floor space by roughly 20%.5 Catella Research, in its August review, states that the same forces behind trends in logistics properties make “the European logistics market … the winner of the pandemic in the medium to long term”.6

Higher US leasing volume in Q2 2020 despite lockdowns

Leasing volume of industrial floor space by category in mn sq. ft.

Sources: BofAML, JLL Research, Credit Suisse

Indeed, according to Sven Schaltegger, portfolio manager at Credit Suisse Asset Management, “The logistics property market seems on the cusp of a particularly large expansion. Asset managers with access to deal flow and a network of local logistics and industrial specialists are well-positioned to capitalize on this opportunity on behalf of their clients.”

Diversification and value

Portfolio diversification remains as important as ever, and for those investors seeking to add a new asset class to their investments, logistics real estate deserves close attention. Real estate in general is traditionally viewed as a source of both respectable returns and capital protection, and given the market uncertainty brought on by the COVID-19 pandemic in an already record low-yield environment, it is enjoying popularity as a relative safe haven. Yet even before markets hit turbulence, logistics real estate in particular was picking up steam – for example, CBRE reported strong and sustained interest in high-quality logistics assets globally during 2018 while predicting robust growth in the next year.7

Returns on investments in the industrial real estate sector, which includes logistics properties, have long been attractive, and the forces behind expansion in the logistics sphere are set to continue driving this trend.8

Global Real Estate

Credit Suisse Asset Management is a leading provider of real estate investments. 
Our broad array of real estate solutions spans a range of geographies and
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There are a few elements to consider when compiling a global logistics real estate portfolio with a maximum risk-adjusted return at a certain level of risk. Firstly, it is paramount to have a solid understanding of the different risk-return characteristics offered by core, core-plus, and value-add investment opportunities. While core investments, i.e. standing assets in good locations with high-quality income streams from strong tenants, tend to be lower risk, their upside is typically also limited. Such core investments are helpful to add an element of stability to the portfolio, particularly due to their stable and long-term income returns, which in the case of logistics investments tend to be higher than for other real estate sectors. At the same time, a diversified logistics portfolio should include a development component seeking to unlock the premiums available from new facilities in today’s strong and undersupplied market.

Of course it is crucial to manage the development risks carefully, for instance by limiting speculative developments, focusing on built-to-suits for strong covenants or using forward funding structures with best-in-class and well-capitalized developers. Scrutiny should also be applied to regional diversity, taking into consideration the fact that demand for logistics space is rising across the globe, and thus geographical weighting of a particular strategy is crucial.

Satisfying these criteria gives investors the opportunity to combine income derived from rising logistics property rents with capital appreciation as a consequence of active management, thereby providing the potential for overall long-term performance that outpaces many other asset classes in the current uncertain market environment. Naturally, investment selection is at the heart of a good strategy, and much depends on the ability of fund managers to source and execute on the right deals.

Annual total returns of the industrial sector

Listed and private real estate indices, in %

Sources: Bloomberg, MSCI

Partnerships key to good deals

In seeking attractive investment opportunities for logistics properties, it is difficult to overestimate the value of networks and partnerships. This is an important distinction from, for example, listed equities, where there are legal limitations on the kinds of material information investors are able to access. Real estate is a “people business,” and portfolio managers who understand this enjoy a significant edge in the fierce competition for high-quality logistics real estate investments.

Real estate investment professionals are deal makers. While they must possess a rich analytical skill set to grasp the economic fundamentals of a given opportunity, soft skills like network building are no less critical. Long-term relationships with experienced local logistics property partners are essential to building up an investment pipeline and deal flow that might not be visible to all market participants, and can also lead to attractive co-investment opportunities.

The key benefits are access to unique insights into local markets and the possibility of sourcing deals that are exclusive and not available to other, less well-connected investors. These can include joint ventures, funds, club deals as well as fund formation strategies by providing seed capital to new strategies.

Positive outlook


New in Scope: If not now, when?

Irrespective of the pandemic, however, the spectrum of investment opportunities has actually widened further. "If not now, then when?" expresses an increased willingness to rethink matters at a fundamental level. The new opportunities and challenges this creates are explored in this issue of Scope.

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1 Credit Suisse Investment Strategy Department, “Logistics real estate: A post COVID-19 beneficiary,” accessed 11.08.2020
2 Statista, “Retail e-commerce sales worldwide from 2014 to 2023”, accessed 27.08.2020
3 Prologis research
4 Scope Analysis “Logistics real estate market survey: Logistics properties as crisis winners – but with risks,”, accessed 12.08.2020
5 Credit Suisse Investment Strategy Department, “Logistics real estate: A post COVID-19 beneficiary,” accessed 11.08.2020
6 Catella Research,, accessed 15.09.2020
7 CBRE Research, “Global Industrial and Logistics Prime Yields 2019,”, accessed 16.09.2020
8 Bloomberg and MSCI