The Rise of E-Commerce

E-Commerce is transforming global trade and consumer dynamics, which we expect will continue to drive demand for logistics assets. The proliferation in recent years of large global and regional consumer retail platforms, such as Amazon, Alibaba and Mercado Libre, has catalyzed growth in e-Commerce. We estimate that e-Commerce uses three times more logistics space than traditional “brick-and-mortar” retail, which we believe will drive strong demand for Class A logistics warehouses as e-Commerce grows. According to McKinsey & Company, e-Commerce is generally characterized by greater SKU variety and therefore increased inventory needs, as compared to traditional retail platforms. E-Commerce also requires enhanced reverse logistics to handle greater return and exchange activity. According to the U.S. International Trade Administration (“ITA”), the growth in e-Commerce was propelled by the COVID-19 pandemic which structurally shifted consumers buying behaviors around the globe, including in markets where e-Commerce penetration had been lagging. We believe that as distribution channels continue to shift toward a direct-to-consumer model, demand for logistics space will continue to grow.

Favorable Supply Chain Dynamics

We believe that warehouse rents today typically represent a small portion of the total supply chain cost. As a result, we believe our assets and services are mission critical to global commerce but the rents we receive can grow over time without materially impacting the profit margins of our tenants.

Increasing Investment

Capital generally follows macroeconomic trends over time. For logistics assets, nearly one in four dollars of total real estate investment is being deployed into the industrial sector, which is an increase from one in ten dollars fifteen years ago, according to CBRE research. According to Investor Management Services (IMS), industrial real estate is taking significant market share from other real estate asset classes, such as office and retail, and we expect this trend to continue for the foreseeable future.

Rising Values

Industrial asset values around the world have grown by more than 300% over the past 20 years, according to JLL research. We believe this is driven in large part by e-Commerce, which relies on more advanced industrial logistics warehouses and sophisticated distribution operations. We believe that this demand will continue to be a strong trend for industrial asset values and that industrial asset owners and operators with significant land reserves will be well positioned as a result.

We believe that underpenetrated regions, including countries in Central and South America where we operate, will benefit from the global growth dynamics in the industrial real estate sector. E-commerce is in its infancy in much of Latin America, and we believe nearshoring trade dynamics will drive demand for high quality, well-located industrial and logistics assets in Central and South America. Although omnichannel retail activity has accelerated rapidly in Latin America over the last decade, e-Commerce is in the early stages of development relative to most of the rest of the world, as shown below.