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Region: East Asia, South Korea Investment date: 2016 Sector: Real Estate Exit date: 2019 Deal type: Warehousing and logistics Status date: Realised

Demand for large, high quality warehousing and logistics space across Asia is increasing, driven by a confluence of major trends. Demographic shifts, such as the rising urbanisation of populations and increasing disposable incomes, rapid growth in online retailing and a lack of modern premises, combined with a quest for yield among local and international investors are creating a compelling investment opportunity. Korea is no exception to this, as the country’s historically strong export-led economy increasingly encompasses rising domestic demand for products.

With the need for logistics centres growing, the Standard Chartered Principal Finance Real Estate team, which transferred to Actis in 2018, capitalised on the opportunity, acquiring land in a well-connected location in 2016. Formerly barren, reclaimed land, the site was adjacent to the Incheon International Airport Expressway in western Seoul, offering easy access to the airport, Incheon Port and to greater Seoul.

The team developed two A-grade four-storey modern logistics buildings, partnering with local retail and logistics experts to deliver a highly attractive new hub for e-commerce businesses.  Following a “build to core” strategy of developing assets with a dual focus on occupier demand and investor appetite for the institutional quality cash flows these types of property can generate, the sites were developed to meet the specific needs of e-commerce and retailers, offering affordable, modern, flexible space in a highly convenient location.

The 85,602 m sq Incheon development is larger than other comparable spaces, making it highly attractive to e-commerce businesses, seeking to consolidate their logistics centres into fewer, larger sites. The size and location also appeal to the growing number of third-party logistics companies that are emerging to capitalise on the growing trend for companies to outsource their logistics to specialist operators. The two A-grade, four storey logistics buildings were completed to a high specification, within just 10 months and include features not seen in other warehousing and logistics spaces in the Korean market.

Skybox’ highly attractive features built to meet the needs of e-commerce businesses led to strong demand for space on the site. Within 18 months, the buildings were 90% occupied by leading Chinese and Korean e-commerce retailers. The quality of the development and its highly sought-after location, combined with the strong demand from tenants, led to strong competition to buy the assets, in April 2019, Actis sold Skybox to a large institutional investor, achieving a strong return for our investors.