Garbe: now it’s the right time to invest in European logistics

Now is the time to invest in European logistics, delegates heard at the European Logistics Real Estate Markets briefing, organised by Real Asset Media and Garbe Industrial Real Estate, which took place online yesterday.

Peter Bartholomäus, Head of Fund Management & Capital Markets, Member of the Executive Board, Garbe.

Now is definitely the right time to enter the value-add space but also to buy standing assets,” said Peter Bartholomäus, head of fund management and capital markets, member of the executive board, Garbe. “Prices are lower but demand keeps growing”.

A crucial positive factor is that “demand is not just coming from the e-commerce side but from the automotive sector and other traditional industries as well,” he said. “The biggest let for us this year has come from an automotive company.”

North American investors with equity on their side have spotted the opportunity and are investing heavily in European logistics now, with the intention of selling on in two or three years’ time. “American opportunistic capital is by far the most active at the moment,” Bartholomäus said.

Some European markets stand out, like the UK where rental growth continues to be exceptionally strong, especially around London, or the Netherlands, which is “one big logistics hub”.

In Eastern Europe as well here are virtually no vacancies, especially close to the German and Austrian borders. “Massive investments are targeting these countries, where land and labour costs are lower, and investors are interested in a long-term hold,” said Bartholomäus.

But regardless of differences between countries, across Europe there are four main trends that are increasingly visible, according to Garbe research.

Rental increases continue across Europe

The first is that demand continues to rise in all countries: the war in Ukraine has not affected take-up, which is only constrained by the limited supply of land and logistics space, which in turn is leading to the emergence of second-tier locations. Supply chain dynamics, especially B2C, also drive demand for space, as global supply chains are being re-organised and companies are re-shoring and near-shoring.

The second trend is rental growth. “We’ve seen a significant increase in rental price dynamics, while logistics yields are proving to be sustainably positive, outperforming most other real estate segments,” said Bartholomäus.

The third positive factor is the lower price volatility of logistics properties, that are showing more stable total returns than other asset classes. “In combination with rising rents. rising capital values can be expected regardless of where interest rates are at, although potential falls in rates will strengthen this trend,” he said.

The fourth trend is the growing importance of sustainability and the shift away from greenfield sites to brownfield sites. “The focus will shift to existing properties,” Bartholomäus said. “Modernisation of standing assets will play an increasingly important role in the CO2 footprint of the overall portfolio.”