CBRE Industrial and Logistics Global Research Deck

GLOBAL INDUSTRIAL & LOGISTICS

STRENGTH, RESILIENCE AND CONTINUED EXPANSION June 2021

ECONOMIC OUTLOOK

CBRE

KEY GLOBAL TRENDS

INVESTMENT MARKET

2

REGIONAL MARKET FUNDAMENTALS

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

ECONOMIC OUTLOOK

‘NIKE SWOOSH’ SHAPED RECOVERY APAC (E X CHIN A)

120

M AIN L AN D CHIN A

USA

Asia Pacific GDP expected to return to pre-COVID levels

116 112 Q4 2019 = 100

E U RO ARE A

108 104 100 96 92 88 84 2019 Q4 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4

Source: CBRE Houseview, Oxford Economics, April 2021.

CBRE

4

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

ASIA PACIFIC TO LEAD THE GLOBAL RECOVERY, UK AND USA FOLLOW CLOSELY BEHIND GDP Growth of Key Economies

2020

2021

Germany

Japan

10.0%

5.0%

0.0%

-5.0%

-10.0%

-15.0% China

APAC

World

USA

France

UK

Source: CBRE House-view, April 2021.

CBRE

5

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

KEY GLOBAL TRENDS

SUPPLY OF INDUSTRIAL VARIES BY COUNTRY Industrial Stock (Sq. Ft.) Per Capita Australia, Canada & U.S. Well Supplied – Mexico, China & Brazil Undersupplied Americas

EMEA

APAC

Australia Canada United States United Kingdom Germany France Japan Italy Mexico China Brazil 0

10

20

30

40

50

60

70

Industrial stock per capita Note: U.S. & Australia includes all industrial, the rest of the countries include logistics only.

Source: CBRE Research, Oxford Economics, Qianzhan Industry Research, Shanghai Jiao Tong University, 2020.

CBRE

7

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

GLOBAL TRADE ROBUST RECOVERY IN 2021 YOY Change in Exports Volume (%)

10

World merchandise trade volume is expected to increase by 8.0% in 2021

8 6 4 2

after falling 5.3% in 2020, a smaller decline than previously estimated.

0 -2 -4

Short-terms risks

-6

to the forecast are firmly on the downside and centered on pandemic-related factors.

-8 -10 North America

Europe

Asia 2020

South and Other Regions Central America

2021

Source: WTO Secretariat, March 2021.

CBRE

8

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

GLOBAL SUPPLY CHAIN VOLATILITY DRIVING NEED FOR DOMESTIC SAFETY STOCK Total Business Inventories & Annual Change in U.S. Imports

Shipping volume has surged over the past year as retailers and manufacturers rush to replenish depleted inventories during the pandemic resulting in rising demand for warehouse space, as manufacturers look to compensate for the shortcomings of just-in-time (JIT) production networks and increase “safety stock” to offset supply chain disruptions, such as the recent closure of the Suez Canal.

*Year-over-change percent change in U.S. import value goods, not seasonally adjusted.

Source: St. Louis FRED, CBRE Research, January 2021.

CBRE

9

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

TOP U.S. PORTS BY DESTINATION COUNTRY Who Benefits From China Plus One? West Coast Ports Will Continue To Dominate, But SE Coast Ports Will See Growth With Sourcing Diversification

Source: WorldCity, CBRE Research, Q2 2020.

CBRE

10

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

R E F O C U S I N G S U P P LY C H A I N S I N T H E C O V I D - 1 9 E R A

E X PA N D N E T W O R K I N V E N TO RY

Supply Chain Priorities

Diversify sourcing and production bases

BOOST LOCAL INVENTORY From just-in-time to just-in-case principles

CLOSER TO CONSUMPTION POINTS Increasing inventory for critical products

CBRE

11

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

COVID-19 IMPACT ON LOGISTICS REAL ESTATE IN EUROPEAN MARKETS

Source: WorldCity, CBRE Research, Q2 2020.

Source: CBRE European Logistics Occupier Survey 2020/Analytiqa.

CBRE

12

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

E-COMMERCE HAS BEEN AND WILL CONTINUE TO BE A KEY DRIVER OF DEMAND

2015

$12.6 trillion

2020

• Offline: $11.6 trillion • Online: $ 1.0 trillion

$13.5 trillion • Offline: $11.1 trillion • Online: $ 2.4 trillion

Source: Euromonitor, CBRE Research, May 2021.

CBRE

13

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

E-COMMERCE DRIVERS: FACTORS LINKED WITH THE GROWTH OF E-COMMERCE

We explored 27 factors and split the top ones into four basic categories

DEMOGRAPHY • Urban population • Population Density • Employment in services

CULTURAL PAYMENT PREFERENCE

INFRASTRUCTURE ACCESS

• Digital skills of the population

• Credit/debit card use

• Fixed broadband subscriptions in market

• Internet usage

• Online bill pay

USAGE

• Digital payments

• Transport infrastructure • Timeliness of shipments

• Mobile internet sales share • Dominant e-commerce player

Source: CBRE Research, May 2021.

CBRE

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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

BUT E-COMMERCE WILL NOT GROW AT THE SAME PACE AROUND THE GLOBE CBRE E-commerce Drivers Index: How Prepared Is A Market To Support E-commerce HIGHEST POSSIBLE SCORE

LOWEST POSSIBLE SCORE

Top scoring markets

KEY E-COMMERCE DRIVERS DEMOGRAPHICS - % of urban population USAGE - Digital skills of population - Mobile internet ratio - Dominant e-commerce player CULTURAL - Credit and Debit card use INFRASTRUCTURE - Fixed broadband subscriptions

Source: Euromonitor, CBRE Research, May 2021.

CBRE

15

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

E-COMMERCE PENETRATION WILL PUSH ONLINE SALES TO $3.9 TRILLION BY 2025 Internet Sales As A % Of Total Retail Sales HIGHEST POSSIBLE SCORE E-commerce penetration will continue to grow in established markets

Source: Euromonitor, CBRE Research, May 2021.

CBRE

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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

AND E-COMMERCE RELATED LOGISTICS DEMAND WILL ALSO INCREASE

Logistics Space

Global

2020-25 (%)

+138m sq. m.

2020-25 (%)

+61%

Americas

APAC

EMEA

+38m sq. m. +72m sq. m. +28m sq. m.

+53%

+66%

+63%

Source: CBRE Research 2021, aggregated estimates based on analysis of only the 43 markets included in the analysis. Logistics space estimated increase is only associated to the extra space required for e-commerce use. Our calculation assumes $1 billion of additional e-commerce sales requires an additional 1million sq.ft. of logistics space CBRE

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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

INVESTMENT MARKET

INDUSTRIAL INVESTMENT VOLUME CONTINUES TO SURGE IN 2021 Share of Investment by Property Type (Trailing 12 Months, Floating FX)

AMERICAS

EMEA

Share of Total Investment

50% 40%

APAC

40%

50%

40%

60%

30%

40%

30%

50%

20%

30%

20%

40%

10%

20%

10%

30%

0%

10%

0%

20%

30% 20% 10% 0% 2015 2016 2017 2018 2019 2020 2021 Multifamily Hotel

Industrial Office

Retail

2015 2016 2017 2018 2019 2020 2021 Multifamily Industrial Retail Hotel Office (rhs)

2015 2016 2017 2018 2019 2020 2021 Industrial

Retail

Hotel

Office (rhs)

Source: CBRE Research, Real Capital Analytics, Q1 2021.

CBRE

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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

LONG TERM YIELD COMPRESSION Composite Yields By Property Type

%

Global Office Yield

Global Retail Yield

Global Industrial Yield

9 8 7 6 5.01

5

4.22 4

4.14

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

3

Source: CBRE Research, Q1 2021.

CBRE

20

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

INVESTMENT INTEREST IN I&L REMAINS HIGH GLOBALLY Preferred Mainstream Property Sector For Investment In 2021

% of respondents

40%

30%

20%

10%

0% Industrial & Logistics

Multifamily

Office

Hotels / Resorts

Retail

Source: CBRE Global Investor Intentions Survey, 2021 CBRE

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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

REGIONAL MARKET FUNDAMENTALS

GLOBAL VIEW – 2021 YTD EMEA

5.9 MSM

+3.1%

10.7B

TAKE-UP

RENT GROWTH

SALES VOLUME

AMERICAS

117.4 MSF

+5.8%

$17.9B

NET ABSORPTION

RENT GROWTH

SALES VOLUME

CBRE

APAC

23

15.4 MSF

+0.8%

$5.0

NET ABSORPTION

RENT GROWTH

SALES VOLUME

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

THE AMERICAS RECORD FUNDAMENTALS PAST 6 MONTHS

The industrial market continues to thrive with record net absorption, transaction volume and rental rate growth. Vacancy rates continue to decline. There is a record amount of sq. ft. under construction, however completions have declined in the face of construction material shortages.

3PLS INCREASE MARKET SHARE

While all industries continue to do well, the 3PL industry is performing the best. The industry is increasing market share as more companies outsource distribution due to rapidly increasing costs and a lack of available space in several markets.

INVESTORS STILL VERY BULLISH

Industrial remains the darling of commercial real estate investment. Domestic and foreign Capital are flooding the market looking to purchase industrial properties.

Investors are now looking at class B space as well as secondary and tertiary markets. Despite this demand actual transaction volume has decreased because of the lack of available space for sale. Record fundamentals has led to further cap rates compression beyond record lows.

CBRE

24

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

AMERICAS REGIONAL SNAPSHOT Momentum Continues In Q1 COMPLETIONS, NET ABSORPTION AND VACANCY (MSF)

U.S. TRANSACTION ACTIVITY BY INDUSTRY, 100K SQ. FT.+

Vacancy Rate (%)

10

300

8 6 4 2 0

200 100

Completions (L) Vacancy Rate (R) Note: Includes U.S., Canada and Mexico.

New Jersey

3.88%

$8.89

PA I-78/81 Corridor

4.75%

$5.18

Chicago

4.50%

$5.83

Dallas/Ft. Worth

4.50%

$4.80

Undisclosed

Houston

4.63%

$4.92

Automobiles, Tires, & Par ts

Atlanta

4.50%

$5.23

Building Mater ials & Construction Medical

Miami

4.50%

$10.15

Los Angeles

4.00%

$11.40

Gener al Retail & W holesale

29%

7%

E-Commer ce Food & Bever age

7%

Manufacturing

16%

PRIME YIELD & AVG ASKING RENTS SQ. FT./P.A.*

3PL

5%

20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 2 20 02 21 0 YT D

0

5% 3% 3%

26%

Net A bsorption (L)

Inland Empire

4.00%

$8.52

120

Seattle

4.00%

$11.32

15

100

Mexico City

8.00%

$6.15

10

80

5

Sao Paulo

7.00%

$4.60

60

0

40

Toronto

3.75%

$10.45

INVESTMENT VOLUME

AVERAGE ASKING RENTS, Y-O-Y GROWTH 20

-5

20

Q 1

Q 1

20 12 20 13 Q 1 20 14 Q 1 20 15 Q 1 20 16 Q 1 20 17 Q 1 20 18 Q 1 20 19 Q 1 20 20 Q 1 20 21

%

U.S.

Canada

Note: Rental rates in U.S. dollars.

CBRE

Mexico

0 Billions (US$)

20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 2 20 02 21 0 YT D

-10

SOURCES: *U.S. markets indicating average asking net rents, other markets indicating prime rents.

CBRE Research, Q1 2021.

CBRE Econometric Advisors, Q1 2021.

Real Capital Analytics, Q1 2021.

Note: Includes U.S., Canada and Latin America.

25

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

SUPPLY PIPELINE IS STRONG, DEMAND KEEPING UP U.S. Under Construction (MSF)

47% Preleased 400 350

375.7 315.7

300

321.6

312.7

298.3

250 200

176.5

150 100

97.8

134.4

115.7 86.5

50 0 Q1 2020

Q2 2020

Q3 2020 Inventory Under Construction

Q4 2020

Q1 2021

Preleased Source: CBRE Research, Q1 2021.

CBRE

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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

EMEA RESILIENCE AMID GLOBAL CRISIS The logistics sector in EMEA has proven resilient during the challenging pandemic environment, resulting in record take-up and investment volumes. Existing demand trends around e-commerce have been reinforced because of the pandemic, and Brexit may lead to further diversification of supply chains.

LABOUR AVAILABILITY European logistics occupiers increasingly prioritize labour availability in their site selection process. This is driving demand in less traditional locations throughout the region.

SUPPLY RESPONSE Developers are struggling to respond to the increasing demand for logistics space due to the lack of available and suitable land. Over twothirds of the incoming new supply already have a tenant appointed, limiting the ability to react to further supply chain disruption. Landlords are also using the lack of supply to push rental growth after having prioritized keeping high occupational levels during 2020.

CBRE

27

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

EMEA REGIONAL SNAPSHOT Very Strong Investment Volumes During Q1 2021 AVERAGE PRIME EUROPEAN YIELDS

EUROPEAN COMPLETIONS, TAKE-UP AND VACANCY

30

12%

25

10%

20

8%

15

6%

5%

10

4%

4%

5

2%

3%

0%

2%

0

10 0 11 0 12 0 13 0 14 0 15 0 16 0 17 0 18 0 19 0 20 21 D 20 2 2 2 2 2 2 2 2 2 2 YT

Completions

Take-up

LOGISTICS PRIME YIELD & RENTS/SQM P.A.

9% 8% 7% 6%

10 20

Vacancy Rate (RHS)

4% 2% 0%

12 20

13 20

14 20

15 20

16 20

17 20

Prime Retail

18 20

19 20

20 21 D 20 YT

Prime Office

EUROPEAN I&L INVESTMENT VOLUMES

EUROPEAN LOGISTICS PRIME RENTS, YoY GROWTH 6%

11 20

Prime Logistics

( Billion)

Thousands

Thousands

(Million sqm)

50

-6% 10 11 12 13 14 15 16 17 18 19 20 21 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 Q1 Q Q Q Q Q Q Q Q Q Q Q

CBRE

3.40%

74.4

France (Paris)

3.50%

70.0

UK (London)

3.75%

£16.5/sq.ft.

Netherlands (Rotterdam)

3.40%

70.0

Spain (Madrid)

4.75%

66.0

Italy (Milan)

4.90%

57.0

Poland (Warsaw)

5.25%

48.0

Czech Rep (Prague)

4.75%

61.2

Belgium (Brussels)

4.00%

58.0

40 SOURCE: CBRE Research, Q1 2021 Completions, take-up and vacancy rate are aggregated for the top 9 countries mentioned above.

30 20

-2% -4%

Germany (Hamburg)

10 0

10 011 012 013 014 015 016 017 018 019 020 21 D 20 2 2 2 2 2 2 2 2 2 2 YT Q1 Q2 Q3 Q4

28

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

THE DEVELOPMENT PIPELINE IN EUROPE IS HEALTHY AND MOSTLY COMMITTED Logistics Stock Under Construction At The End Of 2020

Thousands

THOUSANDS OF SQ M

Built to Suit

Speculative

Speculative as % of Total (RHS)

3,500

60%

3,000

50%

50% 47%

2,500 40% 2,000 1,500

28%

31%

30%

30% 24% 20%

1,000 14% 10%

500 0 CBRE

Germany

France

UK

Poland 29

Italy

Netherlands

Spain

0%

CBRE Research, 2021.

GLOBAL INDUSTRIALSource: & LOGISTICS MARKET Q1 UPDATE

A S I A PAC I F I C LEASING ACTIVITY STAYS FIRM Warehousing demand will remain upbeat. Aside from 3PLs and large e-commerce platforms, emerging demand drivers include community purchase groups and specialised cold chain service providers.

SUPPLY CHAIN RESILIENCE The recent Suez Canal obstruction caused significant disruption to global supply chains and raised shipping costs. The incident prompted occupiers to revisit safety stock strategies and increase inventory levels: a trend likely to translate into significant demand for bonded warehouses, large distribution centres and warehouses serving port facilities.

ROBUST INVESTOR DEMAND Logistics’ share of total investment volume rose from 16% in Q1 2020 to 20% in Q1 2021. Investors retain a positive view towards logistics, with more buyers willing to bid above asking prices for this asset class. Cap rate will continue to compress.

CBRE

30 25

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

LEASING & INVESTMENT MARKET SNAPSHOT 1Q 2021 Net Absorption Continues To Improve PRIME YIELD & RENTS/SQ. FT./P.A. COMPLETIONS AND NET ABSORPTION

VACANCY RATE (Q1)

Beijing

4.95%

$8.8

Shanghai

5.15%

$8.4

Hong Kong SAR

3.50%

$19.1

Greater Tokyo

3.35%

$13.6

Greater Seoul

5.50%

$9.6*

Singapore

6.80%

$14.1

Sydney

4.35%

$11.3

Melbourne

4.45%

$8.0

Brisbane

5.25%

$8.0

Perth

5.25%

$5.8

Auckland

4.25%

$9.6

$20

Chennai

N/A

$4.6

3

$15

Pune

N/A

$4.4

0

$10

120

Greater Tokyo

100

Auckl and Bei jin g

80

Greater Os aka

60

Shenz hen

40

Ho ng Kon g SAR Greater Seou l

20 0

Sing apo re

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Annual New Supply

APAC LOGISTICS RENT INDEX, YOY GROWTH

12%

SOURCE: CBRE Research, Q1 2021. (*Greater Seoul rent as of H2 2020)

$5

20 20 20 21

Billions (US$)

20 19

$0 Q 1

20 Q 09 1 20 Q 10 1 20 Q 11 1 20 Q 12 1 20 Q 13 1 20 Q 14 1 20 Q 15 1 20 Q 16 1 20 Q 17 1 20 Q 18 1 20 Q 19 1 20 Q 20 1 20 21

10%

INVESTOR DEMAND, TOTAL ACQUISITIONS

20 18

-9 -12

8%

20 17

-6

6%

20 16

-3

4%

20 15

6

$25

2%

20 14

9

CBRE

0%

20 13

Q4

20 12

Q3

20 11

YoY (%)

Q2

Guang zhou

20 10

Q1

Q 1

MSF

Shang hai

REIT Other Property Co mp any

Co rporation Property Fund

31

In sti tutio nal Private

Note: 1. CBRE tracks net absorption and completions for selected major markets in Asia (Mainland China Tier I & Selected Tier II cities, Greater Tokyo, Greater Osaka, Singapore).

2. Vacancy: Singapore vacancy rate is based by JTC’s official figure, which represents the island-wise warehouse. Vacancy of Auckland is as of Q4 2020.

3. Singapore yield changed to 30 years leasehold en-bloc industrial building, instead of 60 years leasehold strata-titled factory as previously reported.

4. Australia cities’ yield changed to Super Prime industrial assets, instead of Prime industrial as previously reported.

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

RENTAL GROWTH TO CONTINUE FOR REMAINDER OF 2021 Growth Prospects In Singapore And Pacific Strengthened Rents rebounding

6%

Rents growing steadily 2020 Q4 (Q-o-Q) 2021 Q1 (Q-o-Q)

5%

2021F (Y-o-Y)

4% 3% 2% 1% N/A

0%

Greater Seoul

Greater Tokyo

Greater Osaka

Shenzhen

Guangzhou

Shanghai

Auckland

Beijing

Hong Kong SAR

Brisbane

Melbourne

Perth

Sydney

-2%

Singapore

-1%

Note: Rents for Vietnam and Greater Seoul are not available for Q1 2021. Greater Seoul reports rents on a semi-annual basis, the last rental hike was in H2 2020.

Rental forecast for Sydney, Perth, Melbourne, Brisbane: Super Prime , Net Effective Rents; Auckland: Prime Net Effective Rents; Singapore: Prime Logistics Rents Source: CBRE Research, May 2021

CBRE

32

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

2021 OUTLOOK E-COMMERCE

The pandemic introduced a new consumer base to online sales which led to record transaction activity the past six months. Demand from online sales and online returns (reverse logistics) will be robust in 2021.

More cold storage space will be needed to support the boom in online grocery shopping.

GLOBAL TRADE

Export volume to rebound in 2021. Uncertainties of BREXIT have been cleared up upon the ratification of the UK-EU trade agreement, while US – China trade tension has cooled under Biden administration and led to record import volume. Longer term outlook for APAC is optimistic, due to the signing of the Regional Comprehensive Economic Partnership (RCEP).

SUPPLY CHAIN RESILIENCE

Will increase but the jury is out on the scope. “China Plus One” will be supply source preference for many occupiers but will be more than a year until any effect in real estate demand is generated.

CBRE

33

GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE

CONTACTS AMERICAS

EMEA

APAC

RESEARCH LEADERSHIP

John Morris

Simon Blake

John.Morris1@cbre.com

Simon.Blake@cbre.com

Troy Shortell

Richard Barkham, Ph.D.

Jack Fraker

Jack Cox

Jack.Fraker@cbre.com

Jack.D.Cox@cbre.com

James Breeze

Joerg Kreindl

James.Breeze@cbre.com

Joerg.Kreindl@cbre.com

Matthew Walaszek

Mark Cartlich

Matthew.Walaszek@cbre.com

Mark.Cartlich@cbre.com

Troy.shortell@cbre.com

Matt Haddon Matt.haddon@cbre.com.au

Liz Hung Liz.Hung@cbre.com.hk

George Wang

George.Wang@cbre.com

Richard.Barkham@cbre.com

Henry Chin, Ph.D. Henry. Chin@cbre.com.hk

Julie Whelan Julie.Whelan@cbre.com

Jos Tromp Jos.tromp@cbre.com

Tasos Vezyridis Tasos.Vezyridis@cbre.com

Pol Marfà Miró Pol.MarfaMiro@cbre.com

DISCLAIMER CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE Research.

CBRE

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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE