Jinwu Financial News | Bocom Intl states that it has initiated coverage of the logistics real estate sector, giving it a leading rating, while also initiating coverage of Prologis (PLD US) and SF Real Estate Investment Trust (02191), with a buy rating. The bank believes that the industry will benefit from multiple growth drivers in the coming years and that supply conditions will improve, maintaining an optimistic outlook on the long-term prospects of the industry.

The bank believes that the demand for logistics real estate will continue to be driven by the following factors: 1) The robust development and increasing penetration of e-commerce; 2) The continuous growth of cold chain logistics demand; 3) The prevalence of outsourced logistics; and 4) The growing demand for modern facilities to meet automation and esg requirements. Due to the disruption of construction schedules caused by a high interest rate environment, the number of new projects started in many countries has also fallen to the lowest level in a decade. The bank expects that the decline in supply in the coming years will support rental levels.

The bank believes that, driven by rental growth and potential capital gains, logistics real estate can provide excess returns compared to other real estate. Cbre Group predicts that from 2024 to 2028, the total return compound annual growth rate of modern logistics real estate in the usa will be 11.5%, ranking first among all types of real estate.

Additionally, the bank believes that further interest rate cuts by the Federal Reserve will continue to drive the revaluation of logistics real estate investment trusts in the short term, outperforming the large cap. The bank's research indicates that the sluggish performance of these real estate investment trusts is expected to reverse after the interest rate cuts begin, especially in the 12-18 months following the start of the rate cut cycle.