Trends Report

Invest: APAC Logistics 2024


Table of Content


A Weathered Economy

The global economy weathered multiple headwinds in 2023. Looking ahead, 2024 is likely to be a transitional year as growth slows on persisting challenges, but the foundations of a broader sustained global economic recovery are established.

Recent surveys show high expectations of a soft landing in the US and rate cuts from the Fed, which will likely pave the way for recovery.

Asia remains a bright spot in the global economic landscape. The latest IMF forecasts show the region delivering 2/3 of global economic growth in 2024 (1).



China: Headwind or tailwind?

While APAC is set to remain as the world’s economic growth driver, China remains a key downside risk to global and regional growth. In particular, the prolonged correction in China’s property sector will drag the country’s economy and import demand for certain materials.

Additionally, the sell-off in onshore equities following underwhelming government policy support and mixed economic data reflects general weakness in investors’ sentiment in China.

Yet, there are positive signs. The government’s focus on strategic sectors is likely to offset some of the drag from the property downturn. Key examples include investment into the digital economy and AI, the “New Threes” —electric vehicles, lithium-ion batteries, and solar cells—and R&D for advanced manufacturing, especially in electric vehicles, renewables, and aerospace. China’s Belt and Road Initiative has recently called for greater investment into high-tech and new energy sectors to drive long-term economic growth.

It’s important to highlight that China’s economic backdrop remains stable despite the challenges. Consumer spending has supported economic activity, as supply-side stimulus stabilized the labour market. Investments rose by the end of 2023 on the back of policy support, while industrial production is gaining pace due to improving external demand and restocking.


Promising Markets in APAC

Although China remains a key downside risk for APAC’s economic outlook, the region’s prospects are relatively promising. For one, Asian goods exports are bottoming out and will likely recover gradually as firms look to restock their inventories while external demand improves gradually. The upturn in the global semiconductor cycle is set to benefit South Korea, which registered rising chip exports in Nov 2023, reversing 15 months of consecutive decline (2).

In the longer term, India and ASEAN are poised to play an increasingly important role as a manufacturing and export hub, especially as firms look to diversify their supply chains from China. In ASEAN, countries such as Vietnam, Malaysia, and Thailand are well positioned to benefit from this trend, given their existing production base in green industries like solar panels, batteries, and EV parts.

Investor sentiment is also positive in Indonesia and Vietnam, which are expected to see economic growth increase in 2025. Lower US interest rates will likely benefit these emerging market currencies, ease the load from US-dollar debt, and increase the appeal of local investments (3). 

The economic environment in India is promising: “Growth surpassed estimates, inflation continues to be range bound, industrial production continues to recover post-COVID, and the political regime is expected to remain stable.”

Raghav Vij, Senior General Manager for Investments, ESR India


The Great Unknown - Timing And Size of Rate Cut

Economic growth in 2024 hinges largely on shifts in inflation and interest rates, particularly the timing and magnitude of US rate cuts. The market now expects the Fed to deliver the first cut by June instead of March.

Yet, we may need to wait longer. Even though the US inflation print shows signs of slowing, job growth surged in January while average hourly earnings growth accelerated. The Fed is likely to wait longer for further evidence of a sustained slowdown in inflation before cutting rates.

The path to rate cuts is unlikely to be smooth. In the latest news, weakness in the US Purchasing Managers Index for manufacturing, University of Michigan Consumer Confidence index, and US Personal Consumption Expenditure Price Index have boosted hopes for a rate cut by June. Aside from the uptick in hourly earnings growth, a recent survey by Reuters further highlighted a strong risk of the first rate cut coming later than expected. Meanwhile, an Oxford Economics survey reflected concerns about the magnitude of potential cuts, with only 1 in 10 respondents expecting US easing on the scale anticipated by markets.

While there is uncertainty surrounding the US rate cuts, the silver lining is that there have yet to be significant upside shocks to inflation. One key concern is the Red Sea attacks, where Iran-backed Houthi forces started attacking shipping vessels on one of the world’s main trade routes in late 2023. Recent data suggests that these attacks are unlikely to result in a notable lift to global inflation. Nonetheless, there are other potential issues, such as the onset of El Nino, which could cause food prices to rise again.


Interest Rate Uncertainty a Risk for EM Currencies

Uncertainty in inflation and elevated interest rates  pose challenges to Asian currencies, especially for  emerging markets. In the first two months of 2024, Asian currencies generally depreciated against the US dollar as market expectations for early Fed rate cuts subsided.

This depreciation resulted from the hawkish comments from Fed officials and robust labor market indicators. Greater delay in rate cuts could result in further depreciation in regional currencies.


Geopolitical and Election Risks

Another key factor to watch for is geopolitical and election risks, especially as over half of the world’s population is set to vote in national elections this year. In APAC, Taiwan and Indonesia’s presidential elections have concluded. South Korea will hold its legislative election in 2024, while India’s general election will take place by May.

Eyes will be on the 2024 US presidential election scheduled for November, as it could reshape the US’s engagement in APAC, especially with China. These shifts are worth monitoring, as US domestic politics have recently re-centred around Israeli and European security. The China-Taiwan issue with stronger anti-China rhetoric may resurface, especially with the incumbent retaining power in Taiwan.


Light at the End of the Tunnel

Overall, 2024 is expected to be a transitional year for the global economy as rate cuts and a US soft landing pave the way for a broader recovery in 2025. APAC is positioned to remain the world’s economic driver, contributing the majority of global economic growth. Although China is a downside risk, there are positive signs as exports bottom out. Growth prospects for EMs like India and Vietnam also remain bright.

Nonetheless, it’s important to monitor inflation and interest rate movements, which could impact growth and adversely affect EM currencies. Additionally, geopolitical and election risk is likely to become more prominent towards the end of the year, especially with the US presidential election in November.   

Lingering uncertainty surrounding interest rate policy and economic growth is set to impact APAC’s real estate capital markets. According to a recent investor survey by CBRE, these challenges have resulted in selling intentions reaching the highest level on record, with investors looking to repay debt and realize returns (4). 

On the flipside, buying intentions have risen as many investors look to increase their APAC real estate allocations in 2024. This comes on the back of price adjustments and more distressed opportunities. The rise in investor buying and selling intentions means we could see a recovery in real estate capital market activity during the year.


Industrial Property Outlook

The real estate capital market in APAC  finished the year on a more optimistic note, with retail, hotel, and apartment assets recording upticks in the fourth quarter. However, the full-year tally of capital market activity in 2023 is the lowest since 2012, given the high-interest rate environment that had clipped demand.

But since the start of COVID-19, the industrial sector has  emerged as the most popular real estate asset class in APAC. While a recent investor survey from CBRE shows the industrial sector remains the top choice in the region, concerns are rising amid a prolonged uncertain economic and elevated interest rate environment.  Based on RCA data, industrial asset transaction volume (by dollar value) has contracted some 28 per cent y-y in 2023.

Investors are troubled by two issues.


New Industrial Supply in APAC

The first concern among investors has been the strong wave of new industrial supply across APAC. Modern logistics stock has historically been scarce in the region, especially compared to developed markets in Europe and North America. Yet, in the past two years, new industrial stocks in Australia, South Korea, and Japan have set new record levels.  New completions have placed upward pressure on vacancy rates and could affect rental growth.

The oversupply concern is largely unwarranted. Robust demand has tightened supply in Singapore and Tokyo. New supply in both markets is also set to see a relatively limited supply pipeline ahead. Although a new wave of supply has come online in markets across Australia, vacancy rates are expected to only tick up to about 2%, which is still significantly below long-term averages. Additionally, 35% of the 2024 pipeline along the East Coast has yet to commence and is likely to be deferred to 2025, while another 40% has already been pre-committed.

Seoul’s industrial market has witnessed a surge in construction in response to escalating demand, leading to an influx of new supply offerings. However, according to Cooper Moon, Co-CEO of Kendall Square Asset Management, “this expansion has been characterized by a lack of discernment regarding the end-users’ needs, culminating to a scarcity of warehouses that are genuinely suitable for tenants and end users.”

According to the latest JLL data, Seoul industrial demand remains solid, with annual net take-up in 2023 more than doubling the figure in 2022. This was largely a result of strong take-up in new, modern centres. Nonetheless, while some new completions will fulfil tenants’ modernisation and consolidation needs, some existing assets are also likely to become functionally obsolete. This is likely to lead to a greater disparity within the market as superior buildings outperform.


Shifting Industrial Yields

The second key concern is the pricing of industrial assets and its attractiveness over other asset classes. Comparing APAC industrial against office, which was traditionally a more attractive asset class, we observed that the yield spread between them has narrowed post-covid as industrial yields compressed more. This is a result of a divergence between the two markets caused by shift in structural trends, such as the emergence of alternative work arrangements i.e. working from home that has affected office demand; and the growth of e-commerce that lifted demand for industrial and logistics assets.

Given prolonged economic uncertainty and the current high-interest rate environment, we’ve recently seen the yield spread compression reversing in select markets like Australia, Hong Kong, and Seoul. Gaps have currently adjusted back to what they were during the early COVID-19 period in 2020 but remain far lower than what they were during pre-COVID.

Looking ahead, we do not expect the yield spread to return to pre-COVID levels, as many structural trends that led to the narrowing spread remain intact  if not gaining momentum. While monetary policy uncertainty remains  a key issue, we expect the recent expansion in industrial yields rising on the back of firmer rates, to reverse and compress gradually toward anew post-covid mean when the rate cut regime finally begins.

According to Sam Cooksley, Fund Manager at ESR Australia, long WALE opportunities may return to the spotlight. The recent focus has largely been on assets with short WALE to capture rental reversions. Meanwhile, long WALE has taken a hit in valuations, especially as demand from yield-focused investors (particularly REITs) weakens. There may be some opportunity in this space for investors who can take a longer-term view.


Major Investment Themes

Amidst local market demand-supply dynamics, as well as asset yield and interest rate risk that investors must manage,  two emerging trends warrant some focus. In our view, these trends will be net positive to the industrial sector in the longer term.

The first is accelerating diversification from China, and the rising popularity of China plus one strategy. The latest trade data has shown a sustained decline in US-China bilateral trade. ASEAN is one of the regions that has stepped in to fill the gap, with trade between ASEAN and both China and the US rising over time. Countries like Vietnam, Malaysia, and Indonesia have seen the largest benefits, and this ongoing trend is likely to support demand for industrial assets.

Another key trend is the strong growth in AI applications. Rising demand for AI computation coupled with the energy intensity of AI chips, which have been specialized for AI workloads, is likely to be a significant boon for data centres. For one, the heightened energy intensity of chips means that data centres may need to become bigger or be redesigned for greater energy efficiency.

Additionally, facilities for AI can dispense with low-latency responses, meaning these buildings can be physically sited in more remote locations that have not been previously suitable for data centres. We could expect the APAC data centre market to reap significant growth potential going forwards.



Looking ahead, 2024 will require investors to stay on their toes. Aside from economic and interest rate policy uncertainty, there will also be local demand-supply dynamics to navigate in various markets.

Nonetheless, investment opportunities remain, and capital market activity could ramp up towards the end of the year given rising buying and selling intentions amongst investors.

In the longer-term, prospect for APAC’s industrial market remain bright given the region’s strong economic growth, as well as structural trends like the diversification from China that are gaining pace.


(1) Srinivasan Krishan (2024). “Asia’s prospects for a soft landing have improved.” [Transcript]. Retrieved from

(2) “South Korea chip exports rise for first time in more than a year.” The Straits Times, Dec 1, 2023. Accessed March 18, 2024.

(3) Bowe Adam, Kakuchi Tadashi, Chang Stephen, Ganga Subhash (2024), “2024 Asia Pacific Market Outlook: 4 Themes Investors Should Watch.” PIMCO Viewpoints, February 2, 2024.

(4) “2024 Asia Pacific Investor Intentions Survey.” CBRE Intelligent Investment, January 16, 2024.

About the Authors

Sean Ng

Sean Ng works as an Assistant Manager at the Group Research & Analytics team at ESR.  His primary responsibilities include analysing the economic and property markets across the Asia Pacific and making strategic investment recommendations to the firm.

Prior to joining ESR in 2018, Sean worked at CPG Consultants, providing economic research to its Urban Planning and Integrated Solutions departments.

Having majored in economics at the University of Michigan, and equipped with brief experience in urban planning and facilities management, Sean offers an alternate approach to property market research.

Dr Chua Yang Liang

Dr Chua Yang Liang heads up the Group Research & Analytics team at ESR. He is responsible for monitoring the economic and property markets across the Asia Pacific, and providing strategic data analytics to the Firm.

Dr Chua has almost 20 years of experience in the research and planning-related field. His most recent stint was with JLL where he headed their research teams across South-East Asia.

Trained as an urban planner, Dr Chua brings to the Firm a different perspective to property market research and he publishes original papers on property market trends as well as investment issues.

Dr Chua obtained his doctorate and Masters in City Planning from the University of Pennsylvania, USA, where he developed agent- based simulation for modelling the behaviours of real estate market. He has a Bachelor of Science (Estate Management) First Class Honours, from the National University of Singapore.

Up next