Belt and Road Initiative - Huge Investment Opportunities for Funds

As e-commerce sales continue to grow exponentially across all markets, logistics has experienced a continuous boom over the last 5 years, particularly Europe. Where is the next asset growth?

Data-centres are favoured, hotels and student accommodations are ever popular, even offices are attractive if upgraded to modern use. Well, how about more logistics from Belt and Road Initiative (BRI) logistics hubs. BRI connects modern day infrastructure with fixed links such as rail, roads and ports, with high yielding tenants?

The Belt and Road Initiative is a massive infrastructure project proposed by China’s President Xi in 2013.  The program spans 60+ countries across Asia, the Middle East, Europe, and Africa. A good portion of the investments center on Europe and produce a variety of opportunities within the transport and logistics sector. BRI is one of the largest ever government sponsored CAPEX initiatives. According to World Bank, it will cover 1/3 of world’s trade and GDP and 60% of the world’s population. The BRI impact will result in an extended demand for logistics assets beyond Europe and CEE as distributors and storage companies track the route linking China with its major trading partners in The Americas, Asia and Europe, including the UK.

While talk in the sector is of the untapped opportunities in CEE comprising Poland, Czech Republic, Slovakia, Hungary and Romania, the BRI is unexplored. Is this because funds are constrained by their mandates to invest in fixed asset classes and regions? With the huge surplus of private equity and sovereign wealth cash there is an opportunity to create a fund focused on the BRI in Central Asia….the Marco Polo Logistics fund has a nice ring to it!

The conditions for market making trend-setter funds are the following: 

  • Political will-power and influence, especially from a global super-power
  • Ready availability of debt finance (from both public and private banks)
  • Ease and speed of construction through pre-fabrication
  • Transport access

The outstanding question is one of timing and location. When will tenants come, and which locations are best suited for development? This is the traditional skill of the investor/developer seeking to maximise returns. 

My prediction is that by December 2019, addressing needs from international logistics tenants there will be a newly formed international funds targeted at BRI logistics assets from China, Central Asia, Central & Eastern Europe through to Western Europe including the UK.

Once the political risks are assessed, Arcadis supports funds to assess and reduce any technical and development risks, and to support tenant needs. Our logistics team has advised on over 50 million m2 of logistics transactions globally. With our knowledge of debt funder needs, our team will help funds obtain for debt finance from both public and private institutions funding BRI. Key to achieving this is addressing the Environment Social Governance (ESG) impact.

BRI can refuel the already hot market in logistics assets and help connect East to West. We’re here to help make this happen.

Matthew Cutts

Global Sector Leader - Financial Institutions Ask me a question
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