H1 2018

ASIA INDUSTRIAL & LOGISTICS

Welcome! On behalf of the Asia Industrial & Logistics team I’d like to welcome
you to the H1 2018 edition of our Market Intel magazine.
This second issue explores a variety of trends and hot topics in the Asia industrial and logistics
market, with CBRE experts providing market leading insights to ensure our clients are at the
forefront of the sector.

We look at how investor demand for high quality industrial & logistics assets in Asia is surging
on the back of strong domestic consumption, e-commerce industry expansion and the
development of modern logistics facilities into an institutional investment product.

Also included in this issue is a preview of a forthcoming CBRE Research report on industrial
outsourcing. As manufacturers in Asia seek to reap cost savings, harmonise service levels and
implement best practices across portfolios, many are opting to implement a new model for the
delivery of facilities management services by outsourcing to facilities management
service providers.

We also profile CBRE’s Supply Chain Advisory business in Asia, which continues to
help clients solve complex business problems and build distinct advantage through supply
chain transformation.

DENNIS YEO Finally, we bring you the latest industrial & logistics market news and trends from our national
MANAGING DIRECTOR, ASIA
ADVISORY & TRANSACTION SERVICES | experts in their respective markets from across the region.
INDUSTRIAL & LOGISTICS
Thank you for your support and I hope you enjoy this edition of Asia Market Intel magazine.
 2

H1 2018

ASIA INDUSTRIAL & LOGISTICS

Logistics Industrial Real Estate and CBRE Industrial & Contacts

Investment Outsourcing the Supply Chain Logistics Advantage

LOCAL UPDATES
Hong Singa-
China Japan Korea India Thailand Vietnam
Kong pore
 3

Investor demand for high quality industrial &

INDU S TRI A L logistics assets in Asia is surging on the back of
strong domestic consumption, e-commerce industry
& LOGI S TI C S expansion and the development of modern logistics
facilities into an institutional investment product.
INV ESTO RS EYE
EM ERG IN G A S I A
CBRE Research data show a steady increase in
industrial & logistics investment turnover since
2015, with last year’s total of US$12.7 billion
marking a record annual high.

Figure 1: Asia Pacific industrial & logistics

investment turnover
15

10

5
CBRE Research data
0
2015 2016 2017 show a steady increase
Source: CBRE Research, 2018
Note: Transactions include deals over US$10 million in the industrial and logistics sectors.
M&A and forming strategic partnership with logistics developers are excluded
in industrial & logistics
DENNIS YEO
investment turnover
This momentum is set to continue in 2018, with
MANAGING DIRECTOR
ADVISORY & TRANSACTIONS SERVICES |
CBRE Research’s 2018 Investor Intentions survey since 2015, with last
INDUSTRIAL & LOGISTICS
ASIA
recording a significant increase in the percentage of year’s total of US$12.7
respondents selecting industrial & logistics as their
preferred sector for investment this year. billion marking a record
annual high.
Figure 2: Investors’ preferred sectors for investment
40% E-commerce growth
driving interest in
logistics assets 2016
2017
30%
2018

20%

10%

0
Office Industrial & Retail Multifamily Hotels
Logistics

Source: 2018 Asia Pacific Investor Intentions Survey, CBRE Research, April 2018.

MARKET INTEL H1 2018 – ASIA INDUSTRIAL & LOGISTICS

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Already this year we have seen several major
industrial & logistics investment transactions in
Asia. Whilst activity in the likes of China, Korea
and Singapore remains robust, particularly in the
omni-channel category, CBRE Research has tracked
a considerable flow of capital from a wide range of
experienced industrial & logistics investors into joint
ventures and development projects in emerging
markets, most notably India, Thailand and Vietnam,
driven by the shift in manufacturing from China to
Southeast Asia.
India is an attractive proposition for industrial
and logistics investors due to its healthy domestic
consumption, growing middle income population
and the government’s “Made in India” campaign.
Ascendas-Singbridge recently launched its Ascendas
India Logistics Programme, which features Temasek
as a principle investor. The Programme will invest in
projects in major warehousing and manufacturing
hubs in Mumbai, the National Capital Region of New
Delhi, Pune, Chennai and Bangalore, and reportedly
aims to develop a portfolio of 13 to 15 million sq. ft.
of space.
The joint venture will provide frozen and chilled
food logistics services including warehousing and
across Thailand and will construct a 52,800 sq. m.
cold storage warehouse and a 7,000-9,000 sq. m. dry
warehouse in Samut Prakan, south of Bangkok.
Vietnam is another focal point for development
deals. In February 2018, Warburg Pincus formed
a US$ 200 million joint venture with state-owned
Investment & Industrial Development Corp. to
develop industrial properties across the country.
The JV, called BW Industrial Development JSC,
will develop and operate modern warehouses and
factories in key economic and industrial areas.
Other key trends in the coming years are expected
to include a steady increase in investment in
warehouses, industrial parks and ports located in
countries involved in China’s Belt & Road initiative.
Last mile delivery facilities including urban logistics
spaces and parcel hubs will also attract strong
interest as a proxy for investors seeking to capture
e-commerce growth.

The announcement follows the recent establishment

of Ascendas-Firstspace, a joint venture between
Ascendas-Singbridge and Firstspace Realty to
develop logistics and industrial facilities across
major warehousing and manufacturing hubs
in India.

Among the various industrial & logistics asset types,

cold chain facilities are gaining traction among
investors. In March of this year, Japanese logistics
company Senko Group Holdings Co. partnered with
Thai firm MK Restaurant Group Public Co. to launch
M-Senko Logistics Co.

MARKET INTEL H1 2018 – ASIA INDUSTRIAL & LOGISTICS

 5

OVERCOMI NG Recent years have seen the decentralisation of

manufacturing facilities across Asia as companies
C HALLENGES I N seek to reduce costs, improve efficiency and
spread risk.
OU TSOU RCI NG The dispersal of manufacturing is creating
INDUSTR I A L numerous challenges related to the consistency
of production practices and processes which are
FACI LI T I ES essential for compliance.

MANAG EMENT Failure to meet compliance standards can result in

infractions, production recalls, fines and negative
publicity that can damage a manufacturer’s brand,
reputation and customer base.

Many manufacturers are therefore opting to

implement a new model for the delivery of facilities
management services by outsourcing to facilities
management service providers.

Outsourcing facilities management can reap

significant cost savings, harmonise service levels and
JONATHAN HILLS
SENIOR DIRECTOR, ASIA PACIFIC implement best practices across portfolios, thereby
CBRE RESEARCH ensuring a uniform approach to outsourcing.

MARKET INTEL H1 2018 – ASIA INDUSTRIAL & LOGISTICS

 6

What are the challenges?

The main challenges involved in industrial

outsourcing relate to compliance, quality,
processes, safety and other core areas essential
to production uptime.
Staff training and recruitment can sometimes
be problematic, with plant employees often
unaccustomed to change, and the required skillsets
and experience in short supply in some markets.
Other challenges are often exclusive to certain
countries or geographies. Government policies
and incentives designed to attract manufacturing
investment are influencing decisions around where
to locate operations and creating their own unique
set of issues.
On a more micro level, in some cases manufacturing
plants will have operated in locations for many
years and employ a large proportion of the local
population. This can lead to difficulties for facilities
management providers seeking to implement an
approach that differs from the previous locally
operated model.
Above all, the fact that each company’s portfolio and
facilities’ needs are fundamentally different requires
customised facilities management solutions that are
both locally tailored and capable of delivering
global consistency.
The main challenges involved in
industrial outsourcing relate to
compliance, quality, processes,
safety and other core areas
essential to production uptime.
What are the solutions?
Facilities management service providers must promote
a culture anchored by safe work practices, quality,
talent development and technology, thereby ensuring
manufacturing facilities run as smoothly as possible,
regardless of location or complexity.
Core components of these services include operations
and maintenance management advisory services;
robust strategic supply chain programmes; energy and
sustainability services comprised of certifications,
consulting, and procurement; and health & safety
environment management.
This article is a preview of a forthcoming CBRE Research report
on outsourcing industrial facilities management in Asia Pacific

MARKET INTEL H1 2018 – ASIA INDUSTRIAL & LOGISTICS

 7

I NTERSECTING REA L Rapid e-commerce growth and technological

advances are driving fundamental changes to global
ESTATE A N D THE supply chains and are necessitating new approaches
to real estate strategy.
SU PPLY C HA I N Logistics and related property decisions should
not occur without first ensuring that enterprise-
wide goals are fulfilled through an optimal physical
logistics network and fully aligned real estate plan.

CBRE Supply Chain Advisory helps clients solve

business issues at the intersection of supply chain
and real estate. We focus on determining the most
effective supply chain strategy, supported by a
relevant network and infrastructure that meets
current and future needs.

Our main areas of expertise include:

Facility design: We develop facility design CBRE Supply Chain

TROY SHORTELL
EXECUTIVE DIRECTOR
requirements to meet needs for operations,
Advisory helps clients
processes, product flow, productivity and cost
ASIA
ADVISORY & TRANSACTION SERVICES | management, all of which incorporate technology solve business at the
SUPPLY CHAIN ADVISORY solutions suitable for your business. Concept intersection of the
designs enable network assessment while detailed
designs enable build to suit delivery. supply chain and
real estate.
Business case development: To support
executive board approval for supply chain
transformations, we develop financially supportive
business cases to deliver your business strategy.
Clients can capitalise on our collective experience
across sectors to design impactful and pragmatic
solutions to achieve strategic and operational goals.

MARKET INTEL H1 2018 – ASIA INDUSTRIAL & LOGISTICS

 8

Supply chain strategy: We identify high impact

strategic levers by understanding client and industry
strategic context and engaging senior leadership
teams. We look to integrate internal areas of
expertise to deliver fully aligned practical strategies.

Network design: We use an iterative, data-driven

process to analyse the number, location, size and
role of facilities, and compare the difference in
cost and service between the current network and
proposed scenarios. Our collaborative approach
ensures a balanced outcome aligned to your
business strategy.

Operation and capacity assessments: We

manage and support transformations addressing
people, process and technology to achieve desired
outcomes and targets. The outcome enables you to
maximise the utilisation of your current network
and infrastructure.

Benchmarking and 3PL selection: We evaluate

processes and systems to define requirements
and establish a baseline for overall logistics spend
and service levels, while identifying areas of
improvement and determine how best to reduce
overall cost to serve. We help identify capable 3PLs
and develop RFPs to solicit responses supporting
final awards.

MARKET INTEL H1 2018 – ASIA INDUSTRIAL & LOGISTICS

CHINA
9

New supply of high standard warehouses totalled
900,000 sq. m. in Q1 2018, the bulk of which
was located in West and East China. Solid leasing
demand for logistics space ensured the vacancy
rate in major cities fell by 2pps to a record low
of 10.8%. Vacancy fell significantly in tier II cities
in East China, declining from 15% to 7.8%, while
the figure remained low in tier I cities nationwide.
Rents for high standard warehouses picked up
by 4.5% q-o-q and 1.6% q-o-q in tier I and
tier II cities, respectively, due to the shortage of
industrial land and seasonal pricing adjustments
implemented at the beginning of the calendar
year. Upbeat markets included Beijing, where
the wintertime suspension of construction
and more rigorous safety inspections created
M A RK ET U PDAT ES
a bottleneck for new supply and supported rental
growth of 9.9% q-o-q.
The undersupply situation in China tier I cities
was exacerbated this quarter by the imposition of
tighter restrictions on industrial land use. During
the period, authorities in Beijing tightened their
industrial land allocation policy under which
only high-tech related companies are eligible for
industrial land acquisition. Similarly, authorities
in Shanghai cracked down on the approval
of occupation permits for newly completed
warehouses, forcing tenants to find space in existing
buildings or in areas outside the city.
LOUISA LUO
EXECUTIVE DIRECTOR
HEAD OF ADVISORY & TRANSACTION SERVICES | INDUSTRIAL
CHINA

HONG KONG
Forced relocations continued to drive leasing activity
in Q1 2018, with drinks manufacturers, electronics
firms and third party logistics (3PL) companies
completing several major leasing transactions
during the period. Although leasing momentum
has improved significantly since 2017, occupiers
generally remain cost-cautious and are waiting for
confirmation of a solid market recovery.
receiving upgrading demand from larger occupiers,
including data centres, in the coming months.
Steady leasing activity in New Territories West
pushed up rents for cargo-lift access facilities by
1.4% q-o-q. Rents for ramp-access buildings fell
by 0.5% q-o-q amid tightening vacancy. Overall
warehouse rents edged up slightly by 0.2% q-o-q.

Warehouse vacancy edged down by a further 44%
points to 4.7% due to the significant take-up in
warehouses near Kwai Chung Container Terminal.
The low vacancy environment ensured landlords
were under no immediate pressure to lease out
space. Some landlords of cargo-lift access buildings
deliberately left space vacant in the expectation of
SAMUEL LAI
SENIOR DIRECTOR
ADVISORY & TRANSACTION SERVICES | INDUSTRIAL & LOGISTICS
HONG KONG
Rents for flatted factories rose by 0.6% q-o-q in
Q1 2018, supported by increasing demand for
alternative use. Rents for I/O buildings stabilised
after declining for three consecutive quarters,
rising by 0.2% q-o-q. Kowloon East continued
to experience pressure from new office supply,
meaning that rental growth was mainly generated
by Sha Wan and Kwai Chung.
 JAPAN
10
M A RK ET U PDAT ES

The vacancy rate for large multi-tenant properties
(LMTs) in the Greater Tokyo Area rose by 2.0 points
q-o-q to 6.9% in Q1 2018. New supply, which was
equivalent to around 2.7x the quarterly average
over the last three years, and net absorption
both reached record levels. Rental increases
implemented by landlords of existing buildings
ensured overall effective rents rose by 0.2 q-o-q to
JPY 4,080/tsubo.
New supply in the Greater Tokyo Area is expected to
peak in Q2 2018, but subsequent quarters still have
a relatively high volume of supply in the pipeline.
MARO KOBAYASHI
EXECUTIVE DIRECTOR
INDUSTRIAL
JAPAN
In Greater Osaka, the vacancy rate for LMTs
increased by 1.6 points from 19.6% in Q4 2017
to 21.2% in Q1 2018. However, demand was
buoyant and net absorption of 69,000 tsubo was
the second highest quarterly total registered since
Q1 2008. Effective rents fell slightly from JPY
3,500/tsubo in Q4 2017 to JPY 3,480/tsubo.
New LMT supply in the Greater Nagoya Area
consisted of two properties providing a total of
39,000 tsubo. Although the vacancy rate rose
to 10.6% due to the impact of new supply, there
are only three properties with space available,
including newly built properties. Effective rents
stood at JPY 3,530/tsubo for the fourth
consecutive quarter.

KOREA
The period saw solid leasing demand for Grade A
logistics centres from 3PL firms and manufacturers.
Leasing demand is increasingly related to the
domestic retail sector, led by 3PL operators
supporting home furnishing, cosmetics and various
fashion retailers. Hotspots include Yongin, Icheon,
Incheon and Pyeongtak.
During the quarter, local e-commerce player Ticket
Monster announced it would develop its second
logistics centre in Southwestern Gyeonggi province
to cater to increasing demand from the rapidly
growing fresh food and daily goods market. The
size of the development is reported to be around
36,000 sq. m. Elsewhere, leading local retailer
MARKET INTEL H1 2018 – ASIA INDUSTRIAL & LOGISTICS
E-Mart is reportedly close to confirming the
large-scale development of an online-exclusive
logistics centre.
Several transactions involving recently completed
industrial assets were confirmed in Q1 2018. These
included Logiport Icheon (GFA 43,405 sq. m.),
completed in Q2 2017, which was purchased for
KRW 61.2 billion by Deutsche Asset Management
from LaSalle Investment. Elsewhere, DSL logistics
centre (GFA 47,653 sq. m.), supplied in Q1 2017,
was acquired by Kendall Square for around
KRW 51.2 billion.
SIMON BAEK
EXECUTIVE DIRECTOR
INDUSTRIAL & LOGISTICS
KOREA
SINGAPORE
11

Growing optimism in the manufacturing sector
translated to an uptick in activity in the industrial
leasing market in Q1 2018. JTC statistics showed
that overall warehouse leasing volume rose by
17.1% y-o-y to SGD 2.85 million in the first
two months of the year, while overall factory
leasing volume grew by 84.7% y-o-y to
SGD 8.86 million.
Leasing transactions this quarter were primarily
driven by the semiconductor, e-commerce and
aerospace industries, with most deals involving
relocations or consolidations. The improved
leasing activity helped drive an increase in net
absorption and enabled factory and warehouse
vacancy to remain stable.
ADVISORY & TRANSACTION SERVICES | INDUSTRIAL & LOGISTICS
M A RK ET U PDAT ES
Demand is expected to remain mixed and will be
driven by a few key sectors. The growing preference
for high quality space is likely to benefit landlords of
newer building stock. CBRE Research expects 9.14
million sq. ft. of new industrial supply to enter the
market in 2018, a sharp reduction from the 20.88
million sq. ft. of new stock completed in 2017. The
slower supply pipeline over the next 12 months will
provide a window for the market to recalibrate the
existing mismatch between demand and supply. Any
further improvement in occupancy will help alleviate
downward pressure on rents, meaning that rents
could stabilise before year end.
BRENDA ONG
EXECUTIVE DIRECTOR
SINGAPORE

INDIA
Industrial and logistics leasing activity in India
continued to witness strong growth during H2 2017,
with close to 10 million sq. ft. of space leased in
major cities.
under 85,000 sq. ft. during H2 2017, while the
number of large sized transactions (those above
200,000 sq. ft.) more than doubled compared to
the first six months of the year.

The significant advance in leasing volume was
primarily driven by large sized space take-up from
3PL, engineering and manufacturing, Fast Moving
Consumer Goods (FMCG) and e-commerce
companies, which collectively accounted for 65% of
warehousing space leased during the period.
The average size of space take-up increased from
approximately 65,000 sq. ft. during H1 2017 to just
The government’s recent decision to grant
infrastructure status to the logistics sector will
provide access to lending on easier terms and
with enhanced limits and is set to further open up
the industry to foreign investment. India’s ranking
on the World Bank’s Logistics Performance Index
improved from 54 in 2016 to 35 in 2017.

JASMINE SINGH
EXECUTIVE DIRECTOR
NATIONAL HEAD, INDUSTRIAL & LOGISTICS SERVICES
INDIA
 THAILAND
12
M A RK ET U PDAT ES

Despite improved economic indicators and the
government’s promotion of the Eastern Economic
Corridor (EEC), sales of Serviced Industrial Land
Plots (SILPs) slowed significantly in Q1 2018.
Total sales of SILPs, excluding Rojana, decreased
by almost -80% y-o-y to 119 rai (47 acres or 19
hectares). No new supply this quarter ensured
total stock remained at approximately 157,000 rai
(62,000 acres or 25,100 hectares).
The vacancy rate for ready built factories fell from
29.6% in Q4 2017 to 29.1% in Q1 2018 thanks to
ADAM BELL
ASSOCIATE DIRECTOR
ADVISORY & TRANSACTION SERVICES |
INDUSTRIAL & LOGISTICS
THAILAND
net new take-up of 11,500 sq. m. Total supply was
unchanged at approximately 2.36 million sq. m.
The occupancy rate for modern logistics properties
continued to improve, rising to 80.4% this quarter
from 79.5% in Q4 2017.Total supply in Q1 2018
increased by approximately 5,000 sq. m. or 16.0%
y-o-y to 3.43 million sq. m. Net new take-up was
approximately 33,000 sq. m.
Most developers have stopped constructing new
ready built factories as they seek to reduce the
vacancy rate. While the growth of the e-commerce
sector and its related logistics needs is expected to
drive demand for modern logistics properties, CBRE
Research expects to see more developers focus
on the built-to-suit model as they look to increase
occupancy while reducing risk.

VIETNAM
The period saw strong demand from
manufacturing, 3PL, FMCG and electronics
occupiers for industrial and logistics pace in Ho
Chi Minh City and surrounding provinces such
as Binh Duong, Long An and Dong Nai, which
remain popular owing to their good location and
infrastructure. Occupancy in these areas continues
to rise.
2018, supported by the lack of available space.
Rents in other major areas were unchanged.
Strong consumer spending is supporting the
growth of bricks and mortar retail and e-commerce
and generating solid logistics and warehousing
demand. Rents are expected to remain stable over
the coming quarters.

Rents for industrial land in the south and west of

Ho Chi Minh City increased by 3% y-o-y in Q1

HIEU LE
DIRECTOR
ADVISORY & TRANSACTION SERVICES |
INDUSTRIAL & LOGISTICS
VIETNAM
MARKET INTEL H1 2018 – ASIA INDUSTRIAL & LOGISTICS
 13

CBRE I NDUST R I A L & LO G IST IC S ADVANTAG E

MARKET INTEL H1 2018 – ASIA INDUSTRIAL & LOGISTICS

 14

CBRE Asia Advisory & Transaction Services | Industrial & Logistics CBRE Asia Pacific Research

Dennis Yeo Maro Kobayashi Henry Chin, Ph.D.

Managing Director, Asia Executive Director Head of Research, Asia Pacific
Advisory & Transaction Services | Industrial Japan henry.chin@cbre.com.hk
Industrial & Logistics maro.kobayashi@cbre.co.jp +852 2820 8160
dennis.yeo@cbre.com +81 3 5288 9152
Ada Choi, CFA
+65 6328 1317
Simon Baek Executive Director, Asia Pacific
Troy Shortell Executive Director ada.choi@cbre.com.hk
Executive Director, Asia Industrial & Logistics Korea +852 2820 2871
Advisory & Transaction Services | simon.baek@cbrekorea.com
Jonathan Hills
Supply Chain +82 2 2170 5831
Senior Director, Asia Pacific
troy.shortell@cbre.com.sg
Brenda Ong jonathan.hills@cbre.com.hk
+65 6224 8181
Executive Director +852 2820 2881
Graeme Bolin Advisory & Transaction Services |
Liz Hung
Senior Director, Asia Industrial & Logistics Singapore
Associate Director, Asia Pacific
Advisory & Transaction Services | brenda.ong@cbre.com.sg
liz.hung@cbre.com.hk
Industrial & Logistics +65 6328 1308
+852 2820 6557
graeme.bolin@cbre.com.sg
+65 6326 1245 Jasmine Singh
Executive Director
Louisa Luo Advisory & Transaction Services |
Executive Director Industrial & Logistics India
Head of Advisory & Transaction | jasmine.singh@cbre.co.in
Industrial China +91 124 4659700
louisa.luo@cbre.com.cn
+86 21 2401 1359 Adam Bell
Associate Director
Samuel Lai Advisory & Transaction Services |
Senior Director Industrial & Logistics
Advisory & Transaction Services | adam.bell@cbre.co.th
Industrial & Logistics Hong Kong +66 2 119 7905
samuel.lai@cbre.com.hk
Hieu Le
+852 29895123
Director
Advisory & Transaction Services |
Industrial & Logistics
tronghieu.le@cbre.com
+84 28 3824 6125

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CBRE RESEARCH
© 2018 CBRE, Inc. This report was prepared by the CBRE Asia Pacific Research Team, which forms part of CBRE Research—a network of preeminent researchers who collaborate to provide real estate market researchand econometric forecasting to real
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