Why Logistics REITs are a Hot Play in 2022
As the world emerges from the pandemic, there is a growing recognition of the vital role that logistics plays in keeping global trade moving. This has created significant demand for high-quality logistics real estate, and investors are taking notice.
Logistics REITs are now one of the hottest asset classes in commercial real estate, and they are expected to continue to perform well in the coming years. Here’s a look at why it’s a good idea to invest in a top-performing logistics REIT and why logistics REITs are likely to continue to outperform the broader market in the years ahead.
1. Rise of e-commerce favors the already-growing REITs industry
The COVID-19 pandemic has brought into sharp focus the importance of global supply chains and the role that logistics plays in keeping them running smoothly. The pandemic has also caused a surge in e-commerce activity, as consumers have increasingly turned to online shopping for their needs.
This shift to online shopping is here to stay, and it is driving strong demand for logistics real estate. According to a recent prediction by research analysts at the American Marketing Association (AMA), the global market for logistics real estate is expected to experience huge growth by 2025, outpacing the growth of the overall commercial real estate market.
2. The COVID-19 pandemic has highlighted the importance of high-quality logistics real estate
The COVID-19 pandemic has also served to highlight the importance of high-quality logistics real estate. In particular, properties with features such as on-site temperature-controlled storage and last-mile distribution capabilities have been in high demand during the pandemic.
As the world economy begins to recover from the pandemic, there is expected to be continued strong demand for these types of properties. This is good news for logistics REITs, which are well-positioned to benefit from this trend.
3. Logistics REITs offer attractive yields and potential for capital appreciation
Investors in search of yield have traditionally turned to real estate investment trusts (REITs) for income. Logistics REITs are especially attractive in this regard, as they offer higher yields than the average REIT.
In addition to offering attractive yields, logistics REITs also offer the potential for capital appreciation. This is due to the combination of strong demand and limited supply for high-quality logistics real estate.
As the world economy continues to recover from the pandemic, the demand for logistics real estate is expected to continue to rise, which should lead to further price appreciation for logistics REITs.
4. Logistics REITs are a defensive play in an uncertain market
The COVID-19 pandemic has created a great deal of economic uncertainty, and many investors are looking for safe havens for their capital. Logistics REITs offer defensive characteristics that make them an attractive investment in uncertain times.
For one, the demand for logistics real estate is relatively insensitive to economic downturns. This is because global trade continues even during recessions, and companies still need to store and move goods even when times are tough.
In addition, logistics REITs tend to be less volatile than the broader stock market. This is because they are focused on a specific asset class with relatively predictable demand and supply dynamics.
5. Logistics REITs offer exposure to the fast-growing Chinese market
Another reason to consider investing in logistics REITs is that they offer exposure to the fast-growing Chinese market. China is expected to be a major driver of growth in the global logistics industry in the years ahead.
According to a recent report by Ken Research, China is expected to account for about 15 RMB trillion in logistics revenue by 2025.
This is due to a combination of factors, including the country’s rapidly growing economy and its increasing integration into global supply chains.
Investing in logistics REITs is a good way to gain exposure to the Chinese market without directly owning Chinese assets. This is because many of the world’s leading logistics REITs have significant operations in China.
The Bottom Line
Logistics REITs are a hot play for 2022. They offer attractive yields, a great potential for capital appreciation, and defensive characteristics that make them an attractive investment in uncertain times. In addition, they offer exposure to the fast-growing Chinese market.