APAC to see nearly 26m sqm of new industrial space in 2023

This translates to a USD36b increase in investable prime logistics spaces.

According to a JLL report, tailwinds for the logistics and industrial sector remain stronger than the headwinds. 

E-commerce-related demand is holding up and is still expected to be a key long-term driver for warehouse space, particularly in emerging Asia where the growth story has plenty of runway. 

Here’s more from JLL:

The favourable long-term prospects have fuelled a building boom in parts of the region. JLL estimates 25.9 million sqm of new stock is expected to come on stream in 2023 alone to meet the growing needs. This means that the prime logistics and industrial investable universe may increase by an estimated USD 36 billion in 2023, possibly providing an avenue for investors once relegated to the sidelines because of a lack of available product to enter. 

That said, rising construction costs and interest rates could lead to a moderation in the future pipeline as projects are potentially delayed.

Despite strong supply, there remains a chronic undersupply of prime suitable space in core locations, and this coupled with an expectation of resilient take-up paints a picture of further rental growth despite rising vacancy. The backdrop of undersupply, along with the strong uplift in rents in recent years, should translate through to healthy rent reversion in many markets. 

Sydney and Melbourne, for example, are forecast to show a +25% rent reversion in 2023, while rents are projected to show an upward reversion of between 5% and 10% in Singapore, Beijing, and Tokyo. 

The story of rising rents along with broader inflationary pressure is supporting the case for greater use of automation and technology to help reduce operational costs and increase efficiency. This is not just a theme for 2023, but central to a longer-term structural rethink of operations. 

The size of the global warehouse automation market is set to rise from USD 14 billion in 2020 to USD 26.2 billion by 2025 (LogisticsIQ; William Blair; Statista estimates; ID 1094202). This equates to a 13.4% compound annual growth rate (CAGR), which is significantly higher than the 8.7% CAGR in the previous five-year period.