Philippines’s logistics market potentially remains to be great as the market offers a lot of opportunities for investors even if it's not yet mature compared to its ASEAN Neighbors like Singapore and Malaysia.
The Philippines is ranked 60th out of 168 countries in the Logistics Performance Index of the World Bank as of 2018.
In a recent webinar, Tom Over, director of industrial and logistics, JLL Philippines, said the country needs to scale up to be at par with the more mature markets such as Singapore. Investors right now are looking for investments that will give higher yields around 12 percent.
“Big companies with huge landbanks can form a joint venture with a major foreign player to build institutional centers that can attract more investors in the country,” Over said.
Stuart Ross, JLL head of industrial and logistics for Southeast Asia said to attract investors in the logistics industry, the country must continue to develop its infrastructure since the infrastructure is critical to bring efficiency in the supply.
He added, “roads, ports, free trade agreements, tax incentives are extremely important for large companies that can bring a lot of suppliers for the industry."
Over said, despite the economies of Southeast Asia being heavily blown by the pandemic, investors remain bullish as manifested by the clean shift of capital to the Southeast Asian region in 2020 and will continue in 2021.
“Logistics has been a core part of a diversified portfolio. We see a lot in investors in commercial, residential, hotel and retail moving their capital to logistics,” he said.
“Ten years ago, average size of the deals value on logistics was only $19 million but it has increased to $33 million so far. Obviously, there are rising of values and entry of capitals in the market,” he pointed out.
Over emphasized that the supply and demand dynamics right now is a big factor in propelling the industry’s growth and that it is not too late to enter the sector.
He added the market will continue to experience undersupply, and at the same time see more groups that will enter the logistics sector. Furthermore, Ross said we will see more assets to be developed in time as the capital market will be busy talking to investors, and companies from North America and Europe are also preparing to enter the ASEAN market for big opportunities.
“There is going to have an international demand for joint venture [JV] in this space. They are looking to enter the Philippines and build large institutional facilities to absorb the demand. There is definitely opportunity here,” he said.
In a related development, the Lobien Realty Group (LRG) forecasted the local logistics market to achieve an 8.8-percent growth rate from 2018 to 2024 worth P9.70 billion to P1-trillion market by 2023.
LRG also pointed out the impressive performance of e-commerce in the Philippine economy. By the end of 2020, revenues in the e-commerce market are expected to hit $3.540 million. It is also projected to have an annual growth rate of 18.4 percent and is expecting a projected market value of $6.956 million by 2024.
Ross said as more people are using the digital platform for selling products as well as services, the e-commerce growth will boost logistics in Southeast Asia. Pharmaceutical industries, cold storage chains specifically food are other sectors that can boost logistics.
According to Ross, there will be a strong push for a stronger supply chain in a post-pandemic era as countries are going to stockpile products such as medicines and food.
Christophe Vicic, country head of JLL Philippines, said that the Philippines has one of the lowest vacancies in Southeast Asia with an average rate of 10 percent.
“It remains a good area for investment as supply is still a challenge in the region and demand is going up,” he said.
Source: Business Mirror