According to the news report by Bloomberg, Blackstone Group LP has agreed to buy Singapore’s GLP Pte.’s logistics assets worth $18.7 billion. The company states that this will be the world’s biggest ever private-equity real estate acquisition.
Through this deal, Blackstone will gain 179 million sq. ft. of urban logistics assets, which with massively expand the company’s American industrial footprint.
Thanks to the exponential growth in online e-commerce, the need for warehouse space that retailers can use to store goods bought online has also grown hugely.
In order to expand their digital operations and compete in the ruthlessly competitive e-commerce market, retailers have had to cut down on their delivery times as well as offer a wider range of good. Because of this, warehouse space has become critical to the success of digital sales.
The boom in logistics properties is coming at a time when most other real estate, especially commercial property transactions have slowed down due to concerns about increasingly high interest rates as well as a pullback from offshore investors.
This sale comes at a time when there is a record number of deals warehouses, and huge fundraisers for private-equity real estate funds. In fact, as part of a string of logistics purchases, Blackstone also bought out the last-mile properties of Canyon Industrial Portfolio for a sum of $1.8 billion in March of 2018.
Blackstone has become one of the largest buyout companies, with assets under management to the tune of half a trillion dollars. The company was also the buyer of 4 out of 6 of the largest property deals by private equity firms in the last 10 years.
Other companies have also been buying logistics real estate. The world’s largest alternative assets manager entered into an agreement to buy Canadian Pure Industrial Real Estate Trust for a sum of C$2.5 billion (~$1.9 billion) in January 2018. It also purchased over 100 warehouses from Harvard University’s Endowment for a sum of $950 million later in the year in September.
A large part of that portfolio comprises last-mile warehouses, whose value has grown thanks to the expansion of e-commerce businesses requiring fast deliveries and more storage.
The term last-mile refers to the last stage of the delivery process, after a person orders a product online. This metric is becoming a critical differentiator in pushing revenue growth in the e-commerce space.
According to BI’s analyst, Jennifer Bartashus, this means that strategies are changing, wherein businesses are now starting with how to solve delivery issues and then working backwards, while the customer experience stays the main focus.
The analyst also says that the customers’ online shopping journeys need to be made easy, with transparency about the status of their orders and deliveries being critical to a company’s success. Bartashus explains that companies that have created engaging experiences have been rewarded with increased spends and greater customer loyalty.
Online shopping, especially in the United States, is growing rapidly, despite the ongoing trade war that is pulling markets down. According to data released in May by the US Department of Commerce, retail sales from e-commerce in the first quarter of 2019 totaled $137.7 billion. This is a 3.6% growth from the last quarter of 2018. Total sales in the retail sector stayed flat for the same period at $1.34 trillion.
The global co-head of Blackstone Real Estate issued a statement that logistics was the company’s highest conviction worldwide investment theme at the moment, and that they were looking forward to developing their existing portfolio in order to meet the expanding e-commerce demand.
According to the Wall Street Journal, Blackstone’s portfolio spans 1,300 properties, with Amazon.com has its number one tenant.