Video Insight: Logistics

Logistics: retailers' new front office

Listen to Justin Curlow and Kerrie Shaw discuss the shift in the logistics and retail industry in more detail, click on the video link below. 

Executive Summary

There has been a fundamental shift in the retailer model towards omni-channel retail. So that they can respond effectively to the modern consumer’s demand for goods as, where and when they want them, retailers require a seamless supply chain.

This has resulted in a surge in demand for modern logistics space and, with e-commerce penetration expected to continue to rise, we believe there is pent-up demand for suitable logistics stock. We expect the logistics sector to continue to outperform, with returns driven by above-inflation rental growth, partly resulting from increased upward pressure on land values.

However, as the amount of capital targeting the logistics sector is significant, stock selection will remain critical to long-term performance, with assets proximate to key population centres and in land-constrained areas expected to have the strongest return prospects.

While the increasing obsolescence of logistics assets is a concern, we argue that the quantum of users requiring the absolute latest in supply chain solutions remains rather small, and that obsolescence risk may be mitigated by investing in a large, diversified portfolio of modern logistics assets in land-constrained locations close to key population centres. Development and lease-up is one of our preferred strategies as it can offer investors a way to access scarce modern assets at a higher yield on cost than standing core investments.

Development and lease-up is one of our preferred strategies as it can offer investors a way to access scarce modern assets at a higher yield on cost than standing core investments.


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