Logistics bagged 20% of world investment volumes in H1 2020

Photo: Hannes Egler, Unsplash.

Investment in industrial and logistics property accounted for 20% of all global real estate investment the first half of the year according to Savills research.

The firm said that last year’s $196 billion of investment in the sector worldwide was six times that invested in 2009 and exceeded that invested in retail real estate for the first time.

“The current global ecommerce boom, accelerated by consumers shifting their purchasing online throughout the pandemic, has been a major catalyst for this sector’s growth,” said Savills World Research director Paul Tostevin.

Supply chain diversification is boosting demand

But he added that ecommerce is not the only explanation. “Recent supply chain disruption, coupled with escalating trade wars is leading to supply chain diversification, boosting demand for industrial and logistics space in strategic locations closer to the major consumer markets.”

Blackstone, Prologis and GIC have been the top three largest investors in the sector.

The increased competition for logistics and industrial assets among investors has compressed yields.  Between 2007 and 2017, global industrial yields averaged 7.5%, 70 basis points (bps) above average office yields. In the second quarter of 2020 industrial yields moved to 6.1%,  just 10 bps above global office yields.

Income transforms traders to holders

“As the sector has matured, there has been a shift in investor composition towards institutional capital and portfolio deals have accounted for a larger slice of the market, attracting price premiums.  Former developer traders now see the income opportunity and have become developer holders.  The major funds and REITS are attracted to the sector’s long term income streams and there’s a growing scarcity value as stock is being held for longer,” Kevin Mofid, director of Savills industrial and logistic research said.