UK logistics warrant attention as return to health is fastest
While there are opportunities in almost every logistics market in Europe, the UK’s may receive renewed attention. While it is the market that tends to be the fastest to decline, it is also the fastest to return to favour, according to Dr Peter Bartholomäus, head of fund management and capital markets at Garbe Industrial Real Estate.
“We think the UK is back in the market a bit. Although there’s a lot of competition, we see a lot of development opportunities.” Even core money is back for speculative financing and the occupier market is also resuming, he said.
The UK is different to other larger European markets. Spain is still suffering from high interest rates but there are rising vacancies even in the Barcelona area, formerly a hotspot.
“We are still confident that it is going up, but compared to the UK they’re a bit slower.”
In some smaller markets such as Czech Republic and Slovakia there is almost no vacancy at 1%. However, to develop 50 to 70% pre-let is needed which slows the market.
After the UK, France is potentially the second market to recover more quickly than the European average.
Germany saw a heavy decline last year. “Even in Germany occupier demand is slowing down a bit, occupiers are hesitating because there’s some uncertainty when interest rates will go down and the economy will come up so discussions in Germany are a bit slower than the UK.”
There is still tenant demand, he added, but decisions take longer than in the past.
In Italy internet penetration is around 5% so there is still plenty of potential. However, tenant demand is slowing although the situation is not as difficult as in Spain
Netherlands is still ‘The Hub’ with twice the square meters of warehousing than inhabitants. Typically all goods coming from the US go to the Dutch or Belgian border although the real estate transfer tax system has hindered real estate.
“All in all, we are we are positive. The biggest question in the market is when interest rates will begin going down, when capital will be back,” Bartholomäus said. “The positive thing for logistics is you don’t have to sell, you can keep it so there’s still a developer profit in the market.”
Logistics has the advantage of being a typical inflation-hedged investment with lot sizes smaller large CBD offices, “so it does make sense to start buying now,” he said.
“We will see rental growth. It maybe will not be as massive as we’ve seen in the past, but we still think that it’s at least in line with inflation and maybe a bit above.”
