INDUSTRIAL AND LOGISTICS SECTOR TAKES RECORD SHARE
INDUSTRIAL AND LOGISTICS SECTOR TAKES RECORD SHARE OF
THE EUROPEAN PROPERTY INVESTMEST IN Q1 2013
London/Warsaw 25 April 2013 – Industrial and logistics investment was responsible for a record 13% share of overall European commercial real estate investment in Q1 2013, well above the long-term average of 8%, according to the latest data from CBRE.
The €3.7 billion transacted in Q1 2013 also constitutes the highest level since the global financial crisis, and is 28% above the long-term quarterly average of €2.9 billion. The strong quarter of activity adds further weight to the latest CBRE Real Estate Investor Intentions Survey that highlighted logistics as the second most sought after asset class in 2013 behind offices.
The UK, Germany and France were the three most active markets with €2.27 billion transacted between them, making up over 60% of the European market this quarter. However, the Central and Eastern European region, notably Poland and Russia, which considering the size of its economy and population, is dramatically undersupplied with quality logistics, also saw high levels of activity.
The Industrial and Logistics market in Poland is one of the most attractive segments of the market in the region at present. This was evidenced by the fact that in 2012 Industrial and Logistics Investment transaction volumes were significantly higher than any year previous with over 450,000 sq m of transactions concluded which was a record accounting for almost 20% of total investment volume in the country.
“A number of factors have contributed to this market change including occupational factors such as the growth in demand for Polish Logistics due to the improved road infrastructure and growing retail market and in particular the positive impacts of e-tailing. Additionally, the large number of manufacturers relocating production facilities to Poland due to the lower labour costs and skilled workforce is also major factor that is helping drive demand and reduce vacancy. As a result, many core funds now view logistics as less risky and a vital asset class to balance their portfolios.” – said Sead Doyle, Director, Capital Markets, Poland.
There are number of factors indicating that the European industrial and logistics sector is undergoing a structural shift and becoming an established institutional investment class alongside offices and shopping centres.
The strong quarter was heavily influenced by the €1.2 billion transaction in which Norges Bank Investment Management (NBIM) bought a 50% stake in Prologis’ European portfolio, and is set to make further acquisitions in the sector through the joint venture vehicle. This transaction is not only significant because of its size, but also its structure and the type of buyer that it involves – namely a sovereign wealth fund.
Iryna Pylypchuk, Associate Director, EMEA Research and Consulting, CBRE said:
“Until now sovereign wealth funds have largely focused on offices and shopping centres when investing in European real estate. NBIM is the first sovereign wealth fund to make such a substantial direct investment in the industrial and logistics sector in Europe. It is a particularly notable example of an on-going trend, with many institutions, such as pension funds and insurance companies, growing their allocation to the sector - showcasing strong belief in the strategic importance of the sector going forward.”
James Markby, Head of European Industrial and Logistics Investment, CBRE, commented:
“Quality industrial and logistics assets are perfectly positioned to attract investor interest in the current economic climate. For a number of years now, there has been very limited new development, which will lead to an even tighter supply situation than we are seeing today. This provides the potential for rental growth in strategic locations, as well as yield compression – as we believe that the sector is still broadly underpriced and will see further structural shift in yields as it becomes a mainstream choice for institutions.”
Markby added: “Trends in e-commerce continue to drive changes in the profile of the logistics sector, which is set to play an increasingly important role in the world of retail going forward. This, combined with the defensive characteristics of core logistics assets, is expected to start feeding into investment transactions in 2013 and in the mid-term.”