Logistics market sees recovery in Q3 as foreign capital returns

The I&L market has seen a steep decline but is now poised for recovery, delegates heard at Real Asset Media’s European Logistics Investment briefing, which took place last week at EXPO REAL in Munich.

(L to R) Patrick Frank of GLP, Simon Walter of Verdion, Frank Porschke of P3 Logistics Parks, Raimund Paetzmann of Voice of the Occupier, Sally Bruer of Cushman & Wakefield

“After the record high of €80 billion reached in 2022 investment volumes have halved this year”, said Sally Bruer, Head of EMEA Industrial Research & Insight, Cushman & Wakefield. “But volumes are starting to pick up and we expect an improvement in Q3 figures”.

A cautious optimism is justified also by the positive flow of cross-border investments, especially from the US and Canada but with an increased presence of German and UK investors and more capital from Asia, Singapore in particular.

“There is plenty of dry powder ready to be invested and we are seeing more product come to the market as vendors and buyers’ price expectations are beginning to come closer”, Bruer said.

Investors are well aware of the sector’s strong fundamentals and good rental income. Rents have risen by 35% on average in the last five years in Europe, but some key markets like London or Prague have seen increases of 85%.

“We´re still seeing rental increases and a drop in yields”, said Patrick Frank, Country Director Germany, GLP. “The difference is that now you need to put additional effort into the building, as tenants are more demanding on the fit-out and sustainability of assets”.

Sustainability and the need to manage to green is just one of several drivers that are contributing to the strength of the logistics sector despite the macroeconomic headwinds.

Others are e-commerce, nearshoring and the reconfiguration of supply chains and, further down the line, economic recovery as inflation falls and interest rates stop rising.

“It seems that structural trends are stronger than the difficult macroeconomic context”, said Frank Porschke, CEO, P3 Logistics Parks. ”At the end of the day, the most important question is about demand, and the answer is that demand for logistics assets is holding up well”.