The crisis has shown that Logistics is the most resilient sector, delegates heard at Real Asset Media’s European Logistics: e-commerce, supply chains and investment locations briefing, which took place online this week.
‘Logistics is seen as a resilient sector and the fall in volumes is expected to be less than that experienced by other asset types,’ said Anita Simaza, Head of Logistics & Industrial, Europe Europe Capital Markets , BNP Paribas Real Estate.
‘There is a lot of demand and supply is the problem, as there are far more people looking to buy than people willing to sell,’ she said. Many speculative developments have been put on hold recently because of the crisis, exacerbating the lack of supply in many markets.
The Industrial & Logistics sector has been gaining market share. In 2010 it was worth €10 billion, an 8% share of total CRE. This year it is worth €41 billion, a 13.4% share of the market. The current crisis has only burnished its credentials.
The year started on a high: investment in the sector reached €8.8 billion in Q1 2020, an increase of 22% on the previous year and the highest recorded figure of the last fifteen years.
‘In Q1 activity remained good in most markets, supported by buoyant e-commerce, essential goods and food,’ Simaza said. ‘Logistics is seen as attractive because of low government bonds, strong relative pricing compared to other sectors, new entrants creating competition and the strong driver of e-commerce’.
Logistics prime rents increased by 3.9% in Q1 compared to the same period in 2019. They vary from a high of over €90/m2 in Norway and the UK, where Birmingham saw increases of 8% and London of 4%, to a low of below €50/m2 in Bucharest, Marseille and Lisbon.
Rents had been edging up in the last few years because of lack of land supply and lack of speculative developments. ‘Now the Covid-19 crisis is tempering rental growth for prime products, but lack of availability will prevent a decrease,’ said Simaza.’ We expect a plateau this year but in some city locations demand for industrial space is so high that we will see quite high rental growth’.
Logistics prime yields have been declining by an average of 25bps across Europe. They range from over 6% in Lisbon, Budapest, Bratislava and Athens to a low of below 4.5% in London, Paris, Munich, Berlin and Stockholm.
The average spread between office and logistics is 130bps, Simaza said: ‘There are big question marks on the underlying fundamentals of offices, but there are no doubts about the potential of logistics’.
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