Optimism grows for China , Japan and U . S . logistics amid bids for GLP ’ s $ 9 billion assets
Global Logistic Properties , has reportedly shortlisted at least three groups in the bidding for the Singapore-based warehouse operator , according to Bloomberg . The three groups were said to be a managementbacked consortium that includes Chinese investment firms Hillhouse Capital Management and Hopu Investment Management , a Warburg Pincus-led investor group , and the Blackstone Group .
GLP , which is backed by Singapore ’ s sovereign wealth fund GIC , did not confirm the names of the companies but said , in a Singapore exchange filing , that a special committee of independent directors was in discussions with “ several parties ” that will be invited to conduct due diligence .
The industrial property developer , a leading provider of modern logistics facilities in China , Japan , U . S . and Brazil , has an estimated market value of US $ 8.9 billion , according to its annual report 2016 . The group ’ s China ’ s assets make up 57 percent of the value with Japan accounting for 25 percent and the US and Brazil a combined 12 percent . The company is also a real estate fund manager , with assets under management of about US $ 38 billion .
“ The potential transaction won ’ t have a material impact on the logistics market landscape . However , the successful bidder will inherit a diverse portfolio of logistics assets with good growth prospects ,” commented Michael Fenton Head of Industrial at JLL Australia .
GLP is a clear leader in the logistics market in China . With total assets worth US $ 12.2 billion , its network covers 90 percent of China ’ s economy , based on information from its annual report . Demand for modern logistics facilities in China , driven by domestic consumption , has continued to expand despite slower GDP growth .
“ The logistics sector continues to offer exceptional long-term opportunities as China builds its supply chain infrastructure ,” said Stuart Ross , Head of Industrial for JLL China . “ China remains undersupplied relative to its economic size , and e-commerce continues to develop at a rapid pace .”
China ’ s growth potential
According to JLL ’ s China60 report , China ’ s Grade A warehouse stock stands at about 29 million square metres ( sqm ). This compares to the combined equivalent share of major markets in the U . S ., which is close to 155 million sqm . With a land mass that is marginally smaller than the U . S . but a population that is four times bigger , the business of storing and moving goods holds great potential .
The current warehouse stock per capita in China standing at just 1 / 13th of that in the United States , according to GLP .
With most of the existing supply becoming obsolete and unable to meet customer requirements , the long-term opportunity remains very attractive , said GLP in its annual report , adding that the company sees continued strong leasing demand from the retail , fast-moving consumer goods , auto parts and pharmaceutical sectors .
Driven by China ’ s booming online sales , expansion of its China e-commerce business has outpaced the rest of its portfolio . E-commerce as a percentage of GLP ’ s total leased area in China increased from four percent in Financial Year 2010 to 26 percent today , despite the overall portfolio tripling in size , the company said in its annual report .
Japan ’ s logistics market also holds promise . Vacancy rates remain low in Greater Tokyo and Osaka , where GLP ’ s portfolio is concentrated , said GLP . According to JLL ’ s Tokyo Logistics Market Summary 2016 Q4 report , vacancy dropped significantly in 2016 as occupancy rose in buildings that were completed . New supply is expected to reach 722,000 sqm in 2017 , equivalent to about 110 percent of the past 10-year annual average .
“ In the investment market , strong investor interest is expected to persist , and this could place downward pressure on cap rates and underpin capital value growth ,’ says Pelham Higgins , Head of Industrial for JLL in Japan and Korea .
“ If the new GLP decides to siphon off the core stabilized assets and focus on their core development business , there may be implications for Japan where the current GLP J-REIT has a ‘ right of first look ’ over all assets which GLP Japan sells .” This has generated a secure pipeline for GLP J-REIT which may look different after the sale .”
In the United States , vacancy set a new record-low of 5.6 percent in 2016 , based on JLL ’ s Industrial Investment Outlook report . “ As U . S . demand continues to rise and land values soar , major urban areas are running low on options for Class A warehouse space , driving annualised rental growth increases in the vast majority of JLLtracked markets ,” said the report .
GLP ’ s diverse portfolio in the key markets including the United States , China and Japan , will continue to benefit from the growth in demand for warehousing facilities and limited modern logistics supply .
“ The logistics sector continues to offer exceptional long-term opportunities as China builds its supply chain infrastructure ”
32 THE NEW ENGLAND INVESTOR