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Why APAC Logistics


Table of Content


Long-term economic growth

APAC, the global economic powerhouse

2022 was a year of rising headwinds, ranging from worsening geopolitical tensions to tightening financial conditions. These challenges have impacted economic growth globally and depressed regional GDP figures towards the end of the year.

Despite various short-term headwinds, the long-term economic drivers remain intact for APAC to lead the global economy growth story. The latest IMF forecasts show APAC contributing over half of global GDP growth following a small drop during the COVID-19 pandemic.

Demand driven fundamentals

APAC’s long-term economic growth is supported by strong demand-driven fundamentals.

This includes demographic factors, such as rapid urbanization and a growing middle class. The region already accounts for over half of the global middle-class population. Additionally, APAC’s middle-class population is set to grow almost 10 times faster than that of North America over the next few years.

APAC is also home to not only rising incomes and consumption but also growing affluence. The region has already overtaken North America to constitute the lion’s share of global wealth. Notably, China alone makes up almost half of APAC’s affluence.

Rising middle-class and affluence

The global manufacturing hub

Share of global manufacturing value added (2020) Manufacturing value added 10-year CAGR (2010-2020)
Australia 0.5% -1.0%
China 30.1% 7.0%
India 3.1% 5.8%
Indonesia 1.5% 3.9%
Japan 7.3% 1.2%
South Korea 3.1% 2.4%
New Zealand 0.2% 1.2%
Singapore 0.5% 3.3%
UK 2.0% 0.7%
UK 16.9% 1.1%

Robust logistics demand


Strong manufacturing growth in APAC has resulted in goods exports rising, a trend that will continue to support logistics demand. Over the past decades, we’ve seen the region turn into the world’s primary manufacturing hub, largely because of China’s prowess in the sector.

Spurred by the worsening US-China geopolitical tensions, countries like Vietnam, India, and Indonesia are seeing manufacturing and exports rise. These countries have had years of investment capital flow into their manufacturing sectors and are well-positioned for greater growth.

Singapore registered a record flow of fixed asset investment into its manufacturing sector recently. This comes at a time when firms are looking to diversify their production to countries with skilled talent, quality infrastructure, and business-friendly and politically safe environments.

While the manufacturing sector is likely to experience some short-term headwinds amid slowing global demand, the long-term fundamentals remain intact. APAC is the world’s manufacturing hub, and the sector will continue to be a key demand driver for regional logistics markets.

Besides being a manufacturing hub, APAC’s digital economy is another quintessential demand driver for the region.

APAC comprises the majority of global internet and phone users, surpassing that from the Americas and Europe. This is driven by demographic factors, as APAC has more digital natives (defined as Gen Z and Millennials) than Europe and the US combined.

Yet, the penetration rates in APAC remain lower than that in the other two regions. There is huge potential for further growth as urban development continues and affluence rises. This should further fuel the demand for digital services such as e-commerce.

Finally, APAC’s leading position in 5G is also noteworthy. Countries such as China, Japan, and South Korea are early adopters of 5G and have invested significantly in this technology. Aside from having economic benefits, the drive for 5G will inevitably fuel the demand for assets such as data centres.


Given the size of APAC’s digital economy, the region has emerged as a natural leader in retail e-commerce.

The latest available data shows China has the highest retail e-commerce sales globally by a large margin. Developing APAC markets like India and Indonesia also rank amongst the fastest growing e-commerce markets, and are likely to continue, given the underlying large pool of digital natives and rising affluence. Continued e-commerce sales growth will be a key logistics demand driver in this region.

Growth of the 3PL sector is also important. According to a report from Straits Research, the global third-party logistics (3PL) market size is projected to grow from USD962bn to USD2,018bn between 2021 and 2030, a CAGR of 8.6%. APAC will be the fastest growing region, with China, India and Vietnam as the significant hosts of this tremendous growth1.


An ageing population…

Besides a large pool of digital natives, APAC is also home to a greying population. The pace of ageing is faster than in the EU and NA due to the falling fertility rates and increasing life expectancy in APAC.

Chronic diseases amongst seniors are also on the rise as more of a sedentary lifestyle emerges alongside growing incomes. According to the World Health Organisation, about 55 per cent (8 million) of all deaths in Southeast Asia are due to non-communicable diseases such as diabetes, heart disease, respiratory illness and cancer.

… with rising healthcare expenditure

A swelling senior population coupled with sustained economic growth have resulted in healthcare expenditure rising across the region. According to the WHO, China, Singapore, and South Korea recorded the highest growth in healthcare expenses over the past decade.

In spite of this remarkable growth, the potential remains for health expenses to continue to increase. Compared to the US, healthcare expenditure per capita and as a percentage of GDP remain much lower in APAC nations.


Rising demand for healthcare and pharmaceutical products is also set to boost demand for industrial spaces such as cold chain facilities and pharmaceutical manufacturing sites. APAC’s cold chain market is still in its infancy compared to the mature markets in US and Europe.

Growing healthcare needs to support life science logistics

Overall, APAC logistics demand is likely to be robust on the back of multiple structural trends. The region, however, remains undersupplied when it comes to modern logistics stock.

Logistics stock per capita in key APAC markets is far below that of the US, indicating that the logistics market in APAC still has strong growth potential.

Further, with rising e-commerce and e-groceries, logistics spaces, especially cold storage facilities, will become increasingly critical. According to a recent McKinsey report2, the venture capital funding for e-grocery start-ups in Southeast Asia alone grew by over seven times between 2020 and 2021.

Positive supply and demand dynamics in logistics markets across the region bode well for rents and capital values.

2Dymfke Kuijpers, Ali Potia, and Opal Wu, Crafting an omnichannel value proposition for the e-grocery revolution, McKinsey & Company, Dec 2022


Defensive investment location

Resilient economic growth

Despite the attractive fundamentals of APAC logistics markets, investor sentiment has been rattled by the rise of various headwinds, which many expect could result in a marked global economic retardation. Beyond this short-term blip, the APAC logistics market remains a promising defensive investment location.

For one, while APAC is not immune to these challenges, its economic growth is generally more resilient according to the IMF forecasts.

Between the IMF’s latest economic report and that of a year ago, 2023 GDP growth forecasts of APAC economies generally received less of a downgrade than the US and UK. Additionally, the APAC nations are expected to grow faster than both the US and the UK in 2023.

Higher savings and lower debt

Financially well-positioned to weather the storm

APAC is better positioned financially to weather a global economic crisis. Countries in the region typically have lower levels of government debt and higher levels of national savings than the West.

In the case of Singapore, its gross debt figure is a result of high external debts, which are primarily deposits kept in local banks by foreign parties. The nation’s net government debt stands at zero and is rated AAA by S&P.

Meanwhile, Japan holds the highest debt-to-GDP ratio in the world due to a long history of quantitative easing and support for various crises. The Bank of Japan’s ultra-low benchmark interest rates helps to lessen the burden of servicing this debt. BOJ’s policy stance will likely remain dovish and expansionary in the near term. Any tightening is likely to be motivated by meaningful wage increments and economic growth.

Diversification benefits

Finally, the APAC logistics market holds significant risk diversification benefits for investors.

While key western logistics markets have logistics returns that are highly correlated with each other, they have low correlation with certain APAC markets. These include Beijing, Shanghai, Singapore, Sydney, and Tokyo.

For investors exposed to logistics markets in Europe and North America, investing in APAC logistics is a promising way to diversify risk while riding on the region’s long-term growth trajectory.

The prevailing market environment is also likely to offer investment opportunities at attractive pricing.


About the Author

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.

Sebastian Seah

Sebastian Seah works as an analyst with the Group Research & Analytics team at ARA Asset Management. He provides strategic and market-focused analyses of the economic and property sectors across Asia Pacific.

Prior to joining ARA, Sebastian was responsible for the lease and tenancy management of JTC’s industrial properties.

Sebastian graduated with a Bachelor of Science (Real Estate) degree from the National University of Singapore. Together with his experience in tenancy management, Sebastian has the knowledge and skills to provide a multi-faceted approach to real estate research.

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