In October 2012, IPE Real Assets reported on an investment by CBRE Global Investment Partners in Japanese logistics, buying into a joint venture with Global Logistic Properties. That week, James Markby – then capital markets director at CBRE – told IPE Real Assets that in the coming months and years there would be a multi-billion-euro reshuffling of ownership of logistics assets across the globe.
Today, Markby is running Logistics Capital Partners, a European logistics specialist that is building two ‘robotised’ distribution centres for Amazon in northern Italy. Global Logistic Properties, meanwhile, has just delisted from the Singapore Stock Exchange, having been bought by a global consortium.
These events neatly bookend a five-year period during which logistics has been ‘flavour of the month’ and that ‘reshuffling of ownership’ did indeed come to pass. The logistics markets have enjoyed strong performance during that time as investors have piled into a sector buoyed by the rise of online commerce – and global trade.
While internet shopping is expected to continue to grow, the outlook for that second component – global trade – is much less certain.
As we went to press, the governments of the US, Canada and Mexico were meeting in Montreal for the sixth round of talks in their renegotiation of the North American Free Trade Agreement (NAFTA); the CBI, which represents British businesses, urged the UK government to remain in the EU customs union after Brexit; and Japan and Australia had managed to revive the Trans-Pacific Partnership (TPP) without the US.
The global march of free trade no longer looks inexorable. A more protectionist world has huge implications for the global economy. And for global real estate it raises a big question mark over the markets.
“The global march of free trade no longer looks inexorable. A more protectionist world has huge implications for the global economy. And for global real estate it raises a big question mark over the markets”
As we point out in our report on gobal trade, the answer is not simple. Unpicking the relationship between trade and real estate – and logistics more specifically – is difficult. Domestic consumption – and more recently e-commerce – have been more important factors, it is argued. US industrial markets are likely to continue to power ahead.
But in the UK, mired in Brexit uncertainty, some are more pessimistic. Some major investors are still betting on UK logistics: Canadian institutional investor Ivanhoé Cambridge plans to plough capital into developments in the country with Peel Logistics Property. But elsewhere, some fund managers are not bothering to launch UK logistics funds due to a lack of investor appetite.
The future of global trade has implications for infrastructure markets, not least ports. These large assets face another challenge: keeping up with the pace of technological advancements, which can require significant capital expenditure. An alternative approach is to leave the ports behind and invest in ships.
Retail property’s fortunes are also affected by trade, but by far the biggest factor for the sector has been online commerce, which has boosted logistics to retail’s detriment.
It is telling that after a slow year for retail investment, there were two seismic mergers at the end of 2017, involving Westfield and Hammerson, and Intu and Unibail-Rodamco, respectively. We look at what this says about retail markets – and learn why traditional retail bricks and mortar is not necessarily down and out.
And while the US has withdrawn from TPP, the real estate markets in the remaining 11 countries could eventually boosted as a result of the revival – Vietnam and Malaysia, especially, as we report here.
The American withdrawal is without doubt a blow but, as CBRE chief economist Richard Barkham ventures: “It is an unfashionable view at the moment, but I think it is possible that, in three or four years, the US will come back in.”