Logistics land price reduction needed to balance debt costs

Although the outlook for the logistics real estate sector is positive in order to accelerate the development the additional space which is fundamental to occupiers, land prices need to adjust downwards to reflect the new cost of capital, according to Panattoni director capital markets Europe Nick Cripps who is also the firm’s head of capital markets UK.

Cripps said there is currently a dislocation between “very sound occupational fundamentals”  and a capital markets system which is creating many variables and causing uncertainty.

“We’re seeing asset liquidity really dry up from an investment perspective. The cost of money is on the increase globally, but it’s acutely felt here in Europe.”

“We need to see an adjustment to land prices to help influence the viability of developments,” he added.

“We’re already seeing it,” Cripps said. “It’s just patchy and there’s no consistency.”

He explained that land ownership tends to be less institutional in nature and the motives to sell more personal to the individual landowner.

“There’s can be less influence from the debt side. Refinancing is less of an issue because you don’t tend to have leverage secured against land, so I think land will get drip fed to the market.”

He added that there are big opportunities because rents are growing but the price of the land determines the point at which that growth becomes accessible.

Please click on the video above to watch the full interview, or listen to the podcast below.