Location more important than ever when investing in logistics

Choice of location is more important than ever in the highly competitive logistics sector, delegates heard at Real Asset Media’s Locations of the future: key trends driving logistics real estate briefing, which took place recently at Transport Logistic in Munich.

Panellists had different views on the best places to invest, whether to focus on expensive locations like Munich, which has already seen massive rental growth, or whether to bet on places that have so far been overlooked.

¨Some markets, like Munich, are too overheated¨, said Maximilian von Medem, Investment Management Logistics DACH, Union Investment. ¨I would opt for locations that may have a bad name but have interesting prospects, like Bremen. Vacancies are high now, but I think the port will be crucial, so taking the long term view it will become a strong logistics market.¨

On the other hand, in-demand places can count on a strong customer base and interest from banks and tenants.

¨I would choose to split investments across more locations, but choosing space-constrained places like Munich or Stuttgart¨, said Pascal Laucht, Senior Investment Manager Logistics, Swiss Life Asset Managers. ¨Frankfurt has just seen big rent increases, there are no vacancies and no land available for new developments.¨

Geography, infrastructure and market conditions are not the only factors to take into consideration when choosing the right location.

¨Power supply is a very important factor that needs to be checked before choosing a location¨, said Killian Mahler, Managing Partner, Periskop Logistics. Grid capacity and the availability of power can be patchy, at a time when highly automated logistics facilities demand ever more power.

¨It may seem that environmental concerns have taken a back seat in this era of tariffs as people are more cost-conscious¨, said Edward Plumley, Director EMEA Capital Markets, Co-Head Industrial & Logistics Practice Group, Colliers. ¨But it is a fact that EV charging or solar panels have become standard for developers. We have a partnership with VerusSol that includes energy in the rent as a green solution. It costs less so tenants are happy and it benefits everyone.¨

If tenants know they are getting a regular energy supply as well as saving money, they are more likely to favour ESG compliance. The same goes for local authorities and communities, who are more accepting of logistics developments if they are green.

¨It is not just tenants but also banks and institutional investors who are driving the green agenda, because there is no financing available unless the development has solar panels and heat pumps¨, said Mahler. ¨I am sure that Europe will not follow the US.¨