One of the world’s largest landlords of logistics property has said ongoing trade tensions between the US and China is beginning to affect the sector.
Greg Goodman, CEO of Sydney-based Goodman Group, said multinational companies were becoming “more inward-looking” as a result of the trade spat.
This had deepened demand for logistics facilities in markets such as infill areas of Los Angeles and New Jersey in the US, and inner-city locations in Shanghai and Beijing in China, he said.
Goodman Group develops, owns and operates some AUD40bn (€25.5bn) worth of logistics facilities in key global markets, including the US and China, catering to the world’s largest automotive, retail, logistics and online retail companies.
Goodman told IPE Real Assets: “Our customers are concentrating on their domestic markets because they realise there is going to be some volatility in global trade.
“It makes people more inward-looking, and generally they have become more focussed on the fundamentals of their business.”
Against the background of trade tensions, he said, there was a concern that goods were going to cost more, and this, in turn, would force companies to reduce costs in their businesses.
“Customers are driving more efficiencies in their home markets,” he said, “and this will become a long-term driver of businesses,” he said.
“Demand is very strong because these are big domestic consumer belts, and companies going back to home markets are focussing on having facilities in these locations.
“Effectively, they want to be closer to their customers. That is what is driving demand in pockets in those cities.”
Goodman said barriers to entry in such locations were high, and it could take up to four years to get a project running.
The common theme among tenants today was to get more out of their warehousing, so they wanted to put more technology into their warehousing.
In Europe, he was seeing retailers and online retailers reorganising and seeking a presence in key urban locations.
Goodman said: “Europe as a whole is a very strong market for our group. We have over AUD1bn in development starts in Europe at the moment.”
He added that customers in Europe were also concentrating on their domestic European markets.
Goodman spoke of customers across all industries investing in the evolution of their supply chains.
With more than US$67bn expected to be invested in robotics by 2025, the need to have high quality industrial facilities close to customers, designed to house their investment, was a key component of their strategy.
Goodman said that, over the next three years, the group planned to create some AUD10bn worth of new facilities globally.