New Learnings

• JIT (just-in-time) concept has taken a beating.

• Need to hold bigger inventories - easily accessible and close to population centres - of critical supplies: medical, staple products (rice, toilet paper, etc.)

• Self-reliance is key: need to rebuild supply chains with the assumption that borders can be closed any time or won’t reopen in time.

• Australia made a 5-year leap in online shopping penetration in less than 6 months.

• Traditional logistics supporting manufacturing and exports will be down in 2020 by 13-32% [WTO estimates].

• “China Plus One” strategy – supplement Chinese production with other Asian countries (Vietnam, Indonesia).

Logistics to the Rescue

• Logistics + warehousing are in the spotlight for the infrastructure of cities.

• The demand for warehousing has become long-term vs short-term just a year ago.

• Resilience of supply chains will require 5-10% increase in inventories  need better inventory management systems.

• A push towards more manufacturing locations [MK: smaller ones?], including on-shoring and near-shoring.

• Demand for distribution centres and industrial properties was high before the crisis, it’s even higher now thanks to e-commerce.

• E-commerce is here to stay (ratchet effect). Buffer stock for traditionally lean consumer companies will grow.

• The logistics sector is growing; the rest of the real estate market (retail and office) struggles.

• Mar/Apr 2020: 40% of new leasing is for e-commerce warehousing. Will keep growing on the back of e-commerce adoption and higher inventory levels. [also food security and cold storage]

• Capital inflow in the logistics industry is steady. [partially – out of the other sectors of real estate]

• Pension and sovereign wealth funds have 20-25% of real estate allocation in retain, and only 5-10% in logistics/industrial [potential for growth].

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