South Korea’s institutional investors including public pension funds, credit unions and insurers are turning more aggressive towards logistics centers at home and abroad instead of office buildings amid low interest-rate environment and fears over a possible property price bubble.

Investors’ appetite for large logistics facilities has been on the rise following the burgeoning e-commerce market and trade expansion under free trade agreements (FTAs), said market observers. Investment returns from logistics centers are also relatively high of about 7 percent a year, compared with office buildings` 5 percent on average.

According to the real estate investment sources on Thursday, Hana Asset Management Co. will join hands with local social funds to purchase a 130,000 square-meter Amazon’s logistics center in the mid-west of Poland for about 100 billion won ($83 million). The purchase is expected to deliver a stable return of 7 percent to 8 percent per annum.

Vestas Investment Management Co., a Korean asset management firm dedicated to property investment, is also mulling acquiring Amazon’s logistics facility in Leicester, the U.K. for about 200 billion won.

The Government of Singapore Investment Corporation (GIC) partnered with ADF Asset Management Co. to invest around 800 billion won in Dongtan logistics complex in Gyeonggi Province over the next three years. Combining the size of two buildings in the complex, it is as large as 620,000 square meters.

The Korea’s Public Officials Benefit Association (POBA) has recently joined hands with ADF Asset Management to buy a distribution center in Yeoju for about 45 billion won ($37 million). The center was put on the market under the sale and lease back arrangement by TE Logics. TE Logics CEO Koo Eun-jung is a niece of Koo In-hwoi, the late founder of the nation’s large conglomerate LG Group, and the first daughter of Koo Doo-hee, the late honorary chairman of Yesco Co. The POBA expects that the latest investment would make stable profits of around 8 percent annually.

The Korea Scientists & Engineers Mutual-aid Association (SEMA) recently acquired a distribution center sitting on a 53,790-square meter site located in Anseong-si, Gyeonggi-do, for about 50 billion won through a real estate investment trust (REIT) established by the Korea Real Estate Investment & Trust (KOREIT) in July last year.

The Teacher’s Pension also bought a logistics center in Cheonan rented out to LG Hausys at 45.5 billion won, in cooperation with Hana Asset Management Co.

With the burgeoning e-commerce market that has significantly boosted demand for logistics facilities, investors’ appetite for large logistics centers that are capable of not only storing but also packing and loading would continue to grow, said Ko Sung-hwan, a team head of Korea Investment Management Co.

By Kang Doo-soon, Kim Hye-soon, Song Gwang-sup

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