European logistics enters new growth cycle

Swiss Life Asset Managers is positioning itself for what it sees as the beginning of a new growth cycle in European logistics, supported by rising occupier demand, strengthening rents and continued investor appetite across key markets.

“We are very optimistic about the beginning of the next cycle for logistics,” Ingo Steves, managing partner, logistics, at Swiss Life Asset Managers, told Real Asset Media. “The demand for logistics space is increasing. Investors’ appetite is on a very high level.”

Swiss Life Asset Managers, a Switzerland-based real estate and infrastructure investment manager, is actively expanding across European logistics markets including Germany, the Netherlands and France, while also targeting opportunities in Spain, Italy and the UK.

“We are very active as a developer investor for Swiss Life Asset Management,” Steves said. “We are covering now, European-wide, submarkets like Germany, like Netherlands, like France. We would like to be in Spain and in Italy. And we are looking at some sites even in the UK.”

The group is increasingly prepared to pursue speculative development in stronger logistics locations as supply conditions tighten and occupier competition increases.

“The better the location is we are looking at it, the more we are convinced to go speculative,” he said.

Steves said landlords are regaining pricing power in several European logistics markets, with incentives falling and net operating income improving.

“In strong submarkets, we see an increase of headline rents,” he said. “The effective rents are more or less equivalent to the headline rents. That means not that much incentive needs to be paid by the landlord and the developer.

“It comes from occupier market to landlord market again. And the NOI grows all over the place,” he added. “That is a strong sign that occupiers need to know to secure space as soon as possible.”

Swiss Life Asset Managers is targeting both large-scale distribution centres and urban logistics assets, with activity spanning major German logistics markets including Frankfurt, Bavaria and Karlsruhe.

“The demand is for big box logistics as well for last mile or infill markets. We have both,” Steves said. “For example, in Frankfurt, we are in the Bavarian regions for big box developments. We are in Karlsruhe for last mile or infill markets.”

He added that developer-investor platforms increasingly need to cater for multiple logistics formats as occupier requirements evolve.

“As a developer-investor platform, you need to deliver both,” he said. “Smaller boxes in infill markets, last mile logistic boxes and big boxes like e-fulfilment centres.”