Booming cold chain logistics lures investorsJune 22, 2017 / By
Cold chain logistics refers to maintaining specific temperature bands under which perishables are stored and transported. It is perhaps one of the most demanding logistic segments and is currently attracting investor interest in Asia Pacific.
This April, PGIM Real Estate acquired a cold store logistics facility in Jurong, Singapore for S$194 million (US$140 million). The seller is Warehouse Logistics Net Asia, a leader in cold supply chain in Singapore who will lease back the property for 10 years at a rental rate that translates to slightly above 7 per cent net yield. In Australia, Frasers Property Australia secured its first major tenant at its Chullora site in Sydney, after signing a leasing deal with PFD Food Services in May for a A$70 million (US$53 million) cold storage and food production warehouse due for completion in 2018.
Cold chain logistics is getting more and more traction because of fast growth in the pharmaceutical and the food sectors across the region. The complex logistics needs faced by these sectors present regional air hubs such as Singapore and Hong Kong with an attractive opportunity to serve their needs. For example, Kuehne + Nagel unveiled a 50,000 sqm built-to-suit facility (more than 40 per cent of which furnished with chilled storage) in Singapore last year, specifically designed for pharmaceuticals and healthcare companies operating in Asia.
There is also strong demand for food products such as fresh seafood and frozen meat because of rising income levels in the region. The phenomenal growth of E-commerce and direct to consumer deliveries in markets such as China creates additional demand for refrigerated deliveries and warehouses near major population centers. Hong Kong logistics players DCH is an industry leader in China cold chain industry, and Swire Cold Chain Logistics operates seven facilities in China.
Cold chain logistics assets are attracting more investor interest. The Australian cold storage sector was historically dominated by domestic investors and owner-occupiers. However, a deeper understanding of the investment thesis and a desire to have an allocation to a growth sector of the Australian commercial property market has resulted in a more diverse range of capital sources competing for assets (see Chart 1). Data availability in major markets such as China and Japan is still in its infancy, but these less transparent markets provide opportunity for investors with local knowledge to find deals.
Chart 1: Australia’s cold storage investment market
Source: JLL, 2017
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