The largest logistics hubs are found around major ports which connect the most important trade routes. Los Angeles, CA, is the busiest container port in the U.S., handling cargo from the Asia-Pacific (APAC) region, Northern Europe, Mexico, and Central America. As a result, Los Angeles concentrates the most inventory of industrial and logistics real estate in the country. On the opposite side of the world, the APAC region boasts an extensive network of supply chains, contributing to a flourishing industrial and logistics real estate sector. The fastest-growing markets in Asia-Pacific are Seoul, South Korea, and Tokyo, Japan. In 2023, Seoul is projected to add over six million square meters of new warehouse supply, while Tokyo is projected to expand its inventory by about three million square meters.
What major trends impact the sector?
Though the APAC region’s importance in global trade is undisputed, the supply chain issues caused by the coronavirus pandemic and the growing tensions between the U.S. and China have led to many companies restructuring their supply chains. Companies, such as Nike, Adidas, Samsung, Sony, Apple, and Amazon have relocated production outside of China, benefitting manufacturers in Vietnam, India, Thailand, and Malaysia. These are some of the markets with the lowest rent for industrial and logistics real estate in the APAC region.Nearshoring – the process of moving production closer to the customer base - is another trend shifting demand in the industrial and logistics real estate market. Monterrey, Mexico’s second-largest city, has a rapidly growing industrial and logistics sector, with about 13.9 million square meters of new warehousing space under construction in the first quarter of 2023. Mexico’s strategic geographic location as the U.S. south neighbor and its flourishing automotive sector featuring big names, such as BMW, Ford, General Motors, Honda, and Mercedes, make it an increasingly popular destination for nearshoring. Recently Tesla announced plans to open a factory outside of Monterrey – a move likely to boost investment in the region. Considering that logistics comprises the major share of operational costs for industrial tenants, shorter supply chains can be a cost-saving opportunity for businesses.
Who are the industrial and logistics real estate market leaders?
Businesses employ various strategies when it comes to industrial and logistics real estate. Long-term rental contracts in which the tenant pays not only the rent but also operational expenses and taxes, also known as net leases, are commonplace in the industry. In the U.S., the largest industrial and logistics real estate investment trust (REIT) by market cap is the San Francisco-headquartered Prologis. In 2022, the company owned and managed approximately one billion square feet of industrial and logistics real estate in major countries worldwide, including the U.S., Canada, Mexico, Brazil, China, Japan, the United Kingdom, France, and Germany. The company’s portfolio features occupiers such as Amazon, Home Depot, Geodis, and DHL. Amazon, Prologis’ biggest customer, occupied over 43 million square feet of logistics real estate in 2022.Though with a stronger focus on the APAC region, ESR is another global market leader. In 2022, the company had 156 billion U.S. dollars in assets under management. Coupang, JD.com, and Yang Kee Logistics were just a few of the company’s largest tenants. In the United Kingdom, the ranking of the largest REITs by market cap was headed by Segro – an industrial real estate company with a market presence in eight countries across Europe, including the Netherlands, Spain, France, Germany, Poland, Czechia, and Italy.
