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MIPIM: Logistics sector seeing record levels of rental growth

The Logistics sector is seeing levels of rental growth that were unthinkable until recently, delegates heard at Real Asset Media’s European Logistics – Key Trends & Market Outlook briefing, which took place in the Auditorium at MIPIM in Cannes yesterday.

Remon Vos, CEO, CTP

“We have seen strong rental growth and it will continue in the future”, said Remon Vos, CEO, CTP. “In the Czech Republic it has been up to 20% because you can serve the German market from there, so demand is very strong”.

Land availability is ever more restricted in Europe while demand keeps growing, so the direction of travel is clear.

“The main change we have seen in the last few months is the realisation of rental growth”, said Tom Kinsley, Executive Director, European Logistics Investment, CBRE. “Many people in the business have never seen it in their long careers. The US market has seen 15-20% plus increases a year, but Europe has also seen significantly high levels”.

Cain International has very recently entered the Logistics market with the acquisition of a large Grade A portfolio in the UK for £550 million.

“We’d been looking at logistics for a while but we wanted to enter at scale and wanted a homogenous portfolio rather than scattered assets”, said Daniel Harris, Senior Managing Director, Head of European Investments, Cain International. “Yields are low everywhere, but we picked the UK market because it has the highest rents. Rental growth is the key driver for us”.

In the last years investors have been focusing on beds and sheds, but logistics has the upper hand. “Sheds are indexed, unlike beds, so it’s a better investment”, said Jan Philipp Daun, Chief Investment Officer, Garbe Industrial Real Estate.

Often rents are increasing above the inflation rate, but demand from occupiers is so strong they will take them on board.

Rental growth is also compensation for the increasing costs owners have to face, said Robert Dobrzycki, CEO & Co-owner, Panattoni Europe: “Construction costs and land prices are going up, yields are low and inflation is rising so rent is the only release from such pressure. Tenants need the space so they will pay”.