In this CBRE Viewpoint we utilize the data from CBRE’s Millennials: Myths and Realities report on millennials to find out the preferences of 13,000 individuals aged 22-29 in 12 countries: Australia, Canada, China, France, Great Britain, Hong Kong, India, Japan, Mexico, Spain, USA East and West. We use the information about this key age demographic to describe the likely future of the retail industry both in physical stores and online, and how their preferences will influence the logistics market.
Investors continue to be drawn to prime logistics assets due to strong market fundamentals. Compared to other property sectors, prime logistics is an attractive asset class for capital, providing a higher initial return on investment—nearly 6.0%, compared to 4.5% for office and 4.0% for retail. Key takeaways from this report:
Global prime logistics yields continued to decline in the second half of 2016.
EMEA had largest Y-o-Y decline in prime logistics yields.
The Americas had the lowest average prime yield, at 5.84% as of Q3 2016.
E-commerce and a transformation in the physical supply chain is driving growth in China.
Growth in investment activity is expected to continue, but investors may proceed with caution in 2017.
China is going through a robot revolution, prompted by demand for automation in its manufacturing sector. Key takeaways from this ViewPoint:
In China, the use of robots is rising. In 2015, manufacturers purchased 67,000 industrial robots, a number expected to more than double by 2018.
Technological advancement has lowered the cost of robot parts significantly—some cost 88% less than they did in 2006—giving manufacturers incentive to invest in this technology as worker wages rise and the labor force ages.
A rapidly changing global supply chain is driving the trend towards industrial automation—primarily e-commerce and the need to deliver products to the end user more quickly.
Manufacturers in China are responding to the rapid development of automated technology, using it to remain competitive as the labor force in their modernizing economy changes.
Industrial real estate is poised for significant change, with the rapid rise of automated technologies and 3D printing significantly disrupting the global supply chain. Although many of their expected effects are far from being realized, all indications point to the full eventual implementation of these technologies, and it is imperative that I&L owners and occupiers start preparing for the shift today.
Despite a tumultuous global economic climate in 2015, prime logistics rents in global hub markets increased 2.8% year-over-year amid growing demand—driven principally by the growth of global supply chains and the expansion of consumption and production into new locations.
Moderate economic growth with low interest rates, punctuated with bouts of pessimism and volatility—the factors that have characterized the world economy for the past few years—are likely to continue in 2016, supporting moderate growth in commercial rents and investment sales volume globally.