Institutional investor demand for logistics assets should prove resilient in the face of a triumphant U.S. presidential campaign by Donald J. Trump, predicated on tearing up the country's trade agreements, industry analysts say.
Global trade is just one of three logistics industry pillars, along with consumption trends, such as the growth of e-commerce, and underlying supply-chain fundamentals, said Michael Yang, research consultant, real assets, with Boston-based investment consulting firm NEPC LLC.
The latter two pillars have kept asset owners looking at that warehouse-focused corner of the real estate market even as global trade has flatlined recently, said Mr. Yang. Mr. Trump's victory Nov. 8 has added to uncertainty, but demand from institutional investors should remain strong in the current environment of rock-bottom sovereign bond yields, he added.
“Consumption is here to stay no matter who the president of the U.S. is; e-commerce is here to stay,” said Tom Olinger, chief financial officer of Prologis Inc., a San Francisco-based real estate manager focused on logistics, with $67 billion in assets under management, during a Nov. 9 meeting with investors.
Signs have emerged in the days following the election that some investors don't share that confidence.
In NYSE trading Nov. 11, Prologis shares closed the day at $46.50, down 8.9% from the Election Day close of $51.05, before the results of the national vote were known. That compares with a 1.2% gain for the S&P 500 index over the same period.
Goodman Group, a Sydney-based logistics heavyweight, likewise saw its shares retreat on the Sydney Stock Exchange, closing Nov. 11 at A$6.38 ($4.82), down 6.5% over the past two sessions. The S&P/ASX index advanced 2.1% in the same period.
With the critical mass of uncertainty now regarding a President Trump's policies, some profit taking makes sense, said Eric Frankel, research analyst and head of industrial real estate with Green Street Advisors LLC in Newport Beach, Calif.. If Mr. Trump follows through on any of the more protectionist policies he campaigned on, the fallout will weigh on owners of logistics assets, and particularly those like Prologis with material global operations in countries such as Mexico and China, said Mr. Frankel.
Investment consultants, while conceding the outlook for global trade has become murkier, predict logistics will continue to benefit from underlying trends, both in absolute terms and relative to other risk assets.
There are “definitely concerns” for all risk assets from potential U.S. policy shifts, but a case can be made that “logistics is probably one of the least bad places to be within real estate,” said Paul Jayasingha, London-based global head of real estate manager research with investment consulting giant Willis Towers Watson.
Negative scenarios are potentially “very negative, but at the same time, people (still) need to buy their groceries” and other consumer goods, which will support demand for the warehouses operated by logistics companies, he said.