EXPO Real: Logistics market more focused and localised

The logistics market is becoming ever more focused and localised, delegates heard at the Evolution of Logistics real estate – from storage to strategy panel briefing, organised by Real Asset Media, which took place yesterday at EXPO Real in Munich.

¨From an investment standpoint it is all about the micro¨, said Brad Gries, Head of Americas, LaSalle Investment Management. ¨You need to have local boots on the ground, really understand the location and the building and have good data. Investors are becoming more flexible across market locations and asset types.¨

The need for flexibility is a consequence of market, geopolitical and economic uncertainty, experts agreed.

 ¨The market is becoming more fragmented and regional or sub-regional markets are becoming more important¨, said Pascal Metschel, Segment Lead – Asset Class Logistics, Drees & Sommer. ¨New subcategories are attracting investors´ interest.¨

Investors are more cautious and deals are taking longer to complete, if they happen at all. 

¨Capital deployment is very selective now¨, said Sally Bruer, Head of EMEA Logistics & Industrial Research & Insight, Cushman & Wakefield. ¨We are seeing selectiveness around single assets or single jurisdictions if it is a portfolio. It´s all about knowability, as investors really want to get under the skin of those assets.¨

Despite the challenge of uncertainty in the market, there are some strong demand drivers that favour logistics investment. 

Some are relatively new, like the expected growth of Europe´s defence industry, driven by higher spending required by NATO and the need for strategic autonomy, as emphasized by the EU.

¨The EU mandates that by 2030 50% of procurement for defence must be produced in the EU¨, said Bruer. ¨As that figure is now 22%, this will be a big driver. There will be a push, whether it is an achievable target or not, and real estate will be a big part of that.¨

Investors are closely following geopolitical changes and supply chain transformation, and defence is likely to be a conviction play, said René Buck, President & CEO, BCI Global: ¨Some sectors, like automotive, follow the economic cycle but the good thing about defence is that it is guaranteed for a good number of years.¨

Others drivers of logistics are old trends that are coming back into play, like e-commerce and retail. 

¨In the United States retail used to be oversupplied, but as there has been no new supply for over a decade things have changed and now it´s more of a landlord´s market¨, said Gries. ¨There has been a real pick-up on the retail side.¨

The same trend is happening in Europe. ¨We have seen capital allocations to retail really increase in the last twelve months, thanks to an attractive debt environment and yield arbitrage¨, said Bruer. ¨We are seeing a resurgence, but the fact remains that the largest pool of capital raised is still for industrial & logistics.¨

The sector is not back to its 2022 heights, but its strong fundamentals and solid demand drivers are luring investors back.

¨Investors are trying to identify the key markets or submarkets with good potential¨, said Nicolai Soltau, Member of the Executive Board / Head of Portfolio Management, GARBE Industrial. ¨But we believe that capital is coming back to the sector much faster than people expected.¨