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‘Last mile the most defensive strategy’

Urban logistics in Europe’s top cities is the best bet for investors. ‘Western Europe is the engine of growth and urbanisation is the biggest theme, so last mile logistics in the main European cities is the most defensive strategy,’ Ali Imraan, Director of Debt & Special Situations, LaSalle Investment Management, told The Real Estate Day.

‘We make sure 80% of our portfolio is in the top locations and the right urban areas, where you are most likely to see rental growth,’ he said. ‘We particularly like Germany, France and the Netherlands. We don’t believe there will be rental growth across the board’.

Logistics has been a success story but investors must not become complacent.

‘Be careful with the rental growth story,’ said Philip Dunne, Head of Logistics EMEA, CBRE Global Investors. ‘There will be rental growth, but only for the best product in the best places. Chasing yield in secondary markets is a risky strategy’.

Urban logistics has many positives – it is much in demand, it can deliver rental growth and it has easy access to labour, which often is a constraint for out of town logistics. On the negative side, it is difficult to find suitable space close to city centres and there can be issues with neighbours and local councils.

‘Last mile logistics is not popular with the authorities,’ said Alvaro Otero, Partner, CMS Spain. ‘They are happy with big boxes out of town but they are very resistant to having fulfilment centres in residential areas, so that is a real challenge’.

Last mile is only one part of the market, said Dunne: ‘Urban logistics is the cool stuff everyone gets excited about, but it is still a small part of the business. We have done some multi-storey in London and Paris where land is expensive, so going up with ramps makes sense. But in the next layer of cities all you need is traditional logistics space’.

Investing in quality buildings always pays. ‘There is some functional obsolescence but good quality 20-year-old space still has a place and will find a tenant somewhere along the supply chain,’ he said. ‘And if it close to the city it can be repurposed for last mile deliveries’.

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