Focus on green energy makes logistics even more attractive

The focus on sustainability is making Logistics assets even more attractive, delegates heard at Real Asset Media´s Trends 2022: Global Real Estate Outlook briefing, which took place in Brussels this week.

¨In the wider ESG discussion logistics buildings have the advantage of having large roof surfaces which make it easier to install solar panels¨, said Piet van Poppel, Head of Logistics Transactions EMEA & Country Manager Belgium, CBRE Investment Management. ¨This will drive allocations to logistics even more: everyone will want them in their portfolio¨.

The capacity to generate renewable energy at a time of record energy prices is adding yet another arrow to the logistics bow. 

¨It is part of the flight to quality that we are seeing in these uncertain times¨, said Thomas Veith, Global Real Estate Leader, PwC. ¨The ESG impact on valuations is becoming more pronounced¨.

There seems to be no stopping the rise and rise of the logistics sector, which is still driven by e-commerce but also by the near-shoring trend.

¨We´re still seeing a broken supply chain in the US and problems getting parts in, so manufacturers are really keen to inshore production¨, said Byron Carlock Jr, Real Estate Leader, PwC. ¨We´re seeing forty years of globalisation unravel. But one of the defensive measures of the logistics and distribution industry is having more space available for those manufacturers and distributors so they have goods in stock¨.

In the US as well as in Europe, people are keen to avoid the disruption to supply chains that everyone has experienced in the last few years, first because of the pandemic and then because of the conflict in Ukraine. 

¨People are re-building their stocks after the pandemic¨, said van Poppel. ¨Vacancy levels are really low all over Europe, around 1 or 2%, but that´s taking into account obsolete buildings so basically in practice there are zero vacancies¨.

High demand and low supply are driving logistics rents up and that is not likely to change anytime soon.

¨All these factors are driving the logistics story¨, said van Poppel. ¨That´s why we are seeing double-digit rental growth all over Europe and +40% in the UK. We confidently predict rental growth above inflation for the next few years as well¨.

Such belief in the sector´s prospects is making investors confident enough to continue investing, despite the rise in construction costs and other challenges such as low consumer confidence and labour shortages.

¨We´re still active all over Europe and we haven´t shied away from CEE¨, said van Poppel. ¨The region has very strong demographic growth figures which translate into higher demand for logistics¨.

Retail is another sector that has continued to change and adapt to consumers´ evolving needs, building some resilience and climbing out of its recent lows.

 ¨I´m not as bearish on retail as I was two years ago¨, said Carlock. ¨We´re seeing that transformation continue as our lifestyles have changed. Consumers have shifted to experiential spending, on health, beauty, wellness, outdoor activities and virtual reality studios¨.

In the meantime, online retailers will continue to take up bricks and mortar space to deepen their omnichannel offer. 

¨The retail sector has been resilient beyond expectations¨, said van Poppel. ¨It may not be 2023, but it will come back in 2024¨.