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Asian Markets Remain Active, Schwartz Says

06/18/2013 | By Allen Kenney

Jeff Schwartz, chairman of Global Logistic Properties (SGX: MCO.SI), joined REIT.com for a CEO Spotlight video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

Schwartz was asked about the surge in activity in the Asian commercial real estate markets in the first half of 2013. He offered his thoughts on the state of the industrial facilities in China.

“You look at China, for instance,” Schwartz said. “It has one-fourteenth the amount of distribution space per capita that the U.S. has today, a massive shortage. Out of that one-fourteenth, we estimate that more than 80 percent of the space that exists today is completely and totally functionally obsolete.”

Schwartz noted that despite a slowing in the explosive rate of growth in the Chinese economy, it continues to expand at a healthy clip.

“People talk about slowing in China, and it makes you chuckle,” he said. “The rest of the world would kill for 8 percent growth. There’s not another country in the world that is growing at 50 percent the rate that China is.”

Schwartz also noted the strong level of domestic consumption in China.

“Retail sales drive the domestic consumption component, and 82 percent of our space is focused on domestic consumption,” said Schwartz, noting that retail sales are going at a rate of roughly 14 percent in 2013 and are estimated to strengthen in 2014. Global Logistics has a 96 percent lease rate in its properties that are oriented towards domestic consumption.

“As we build space, it’s leasing up ahead of pro forma,” Schwartz said. “There’s tremendous demand. It’s tremendously exciting.”

Regarding Japan, Schwartz said consumer sentiment has improved with the implementation of the Abenomics economic policies.

“We’ve actually seen customer inquiries up 50 percent since mid-December,” said Schwartz, who pointed out that the company’s Japan portfolio is already 99 percent leased. “We estimate that less than 5 percent of the total space in what is the third-largest economy in the world is what we consider modern of efficient logistics space, so there’s still a long way to go in building that out. It’s a great market opportunity.”