Briefing New York: Logistics

The Logistics sector has been investors’ darling but the interest it has attracted may have been too much of a good thing, experts agreed at Real Asset Media’s European Outlook Briefing, which took place in New York last week. 

‘A lot of capital has been allocated to logistics,’ said David R. Hodes, Managing Partner, Hodes Weill. ‘I think there is a growing concern among investors not that funding new logistics is a good thing, but that it may be too much too soon. Those awful-looking warehouses in Romania are a bit of a concern. There is a huge amount of demand, so differentiation continues to be a key element.’

Many investors are opting for logistics ‘because they have plenty of offices  and they don’t want retail so they are looking to see what else there is out there,’ he said.

Accessing the market panel, New York, February 2019

Logistics is keeping investors happy because, despite its rapid growth in the last few years, development is still not keeping pace with demand and rents are still increasing. But to avoid problems down the line it is important to be selective and opt for quality assets in the best locations.

‘We are being much more cautious and to us rental growth is key,’ said Adriana De Alcantara, Managing Director, Portfolio Management Real Estate Americas, Nuveen. ‘But the reality is that is still rental growth in industrial and logistics and there is not much supply. Now more than ever you cannot compromise on location’.

Hodes said that his ‘top investment choice would be the best logistics assets in the best locations. My advice is improve your asset and don’t be so quick to sell it because once you have them it’s the devil you know. The asset you know is better than the one may find around the corner’. 

Re-investment is seen as a risk, he said, which is why ‘people tend to hold on to their assets for longer. But if everybody holds on to assets for longer at some point there are going to be fewer things to buy’.

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