From Bloomberg, June 25:
- Vacancies are climbing at many logistics and industrial parks
- E-commerce slowdown, company offshoring slams landlords
In many parts of China, the warehouses and industrial parks that used to be a magnet for international investors are grappling with a surprising slowdown in business activity.
Logistics hubs that were built in anticipation of a long-lasting boom in e-commerce, manufacturing and food storage are losing tenants, forcing building owners to slash rents and shorten lease terms. Shares of real estate investment trusts that own China commercial properties have plummeted, and some of their managers expect their rental income to fall further.
Average vacancy rates at logistics properties in east and north China are approaching 20%, the highest in years, according to real estate consultancies. More warehouses are being built, which is making the problem worse. “We are looking at a supply glut in logistics and industrial properties in China,” said Xavier Lee, an equity analyst at Morningstar who covers the real—estate sector.
The deterioration has been disappointing for property owners that were counting on an economic rebound in China this year. Global institutions have collectively invested more than $100 billion in warehouses, industrial buildings, office towers and other Chinese commercial real estate over the past decade, according to data from MSCI Real Capital Analytics. The foreign investors include Blackstone Inc., Prudential Financial Inc.’s PGIM, Singapore’s GIC Pte. and CapitaLand Group, and many others.
A few institutions are contemplating divestments of their worst-performing assets before rents fall further. Others intend to wait out the downturn and expect to make money in the long run....
....MUCH MORE
We had a serious interest in warehouses and cold storage, 2019 -2022. Here's a December 2020 post, we were catching a covid tailwind:
Real Estate: "Logistics market is hot, but is a bubble forming?"
It's always nice to see a sector you've been babbling about for a couple years finally referred to as a bubble.
And another:
December 22, 2020
"Why Blackstone and other private equity giants are gobbling up warehouses"
A few more (there may be one hundred posts in all):
June 3, 2019
Logistics: Big Money For Warehouses, Looking at Cold Storage.
...This next bit brings back some memories. My second stock to double was a cold storage company, actually a dairy with a cold storage operation that was valued at about one-quarter of comparables. I started chipping away at the float and before I got anywhere near enough stock, the management, who knew full well the value of the operation, did an LBO and took it private at 2x market and ended up generating cash-on-cash returns (for themselves) of around 40% per annum for a decade or so.
Bastards.
June 6, 2019
"It's About To Become A Hot Market For Cold Storage Facilities"—CBRE
March 30, 2020
"Coronavirus: Panic buying sparks surge in flexible storage demand"
Cold is very important.
If your mandate said you had to have exposure to real estate, this and cousin cold storage were the place to be over the last seven or eight quarters.
By 2022 though it was time for the speculator to move on:
Logistics/Warehouses: "Amazon Seeks To Offload Up To 10 Million Square Feet Of Warehouse Space" (AMZN)
