European Warehouse Investment Hits Record €28 Billion Peak as EuroLogix Launches at MIPIM
March 11, 2019
Leading players in the European logistics market united on Tuesday to launch EuroLogix, an exclusive industry networking event at MIPIM, as a research report from Real Capital Analytics showed that European warehouse investment volumes hit an all-time high of €28 billion in 2018 for single-asset and portfolio deals.
Logistical warehouse investments have grown by an average of 14% a year since 2013, easily outstripping the expansion in the overall real estate investment market, on the back of the e-commerce and logistics wave.
Tom Leahy, Senior Director EMEA at RCA, said: “Warehouse investment has become one of, if not the, asset of choice for many investors. Last year was a record year for investment in the Netherlands, Spain, Poland and Norway and close to a record in Germany. Investments into the top 10 European markets have grown by an average of 21% per annum in the past five years, outpacing the wider market. If CIC’s stand-out acquisition of Logicor in 2017 is excluded from the data, which is reflective of the drive to gain scale and elevated platform deals, then last year was a peak for European warehouse investments as a whole.”
Keith Dowley, Owner of industrial real estate advisors DTRE, said: “The logistics industry is transforming as the sector of choice for investors. Consumer spending online is growing at its fastest ever rate, with e-commerce demand powering intense competition and the evolution of supply chains. Against this background, it was high time for the European industry to establish its own premier networking event at MIPIM – the world’s largest real estate trade fair.”
The appetite for this sector is reflected in the flow of funds into managers, the stock performance of listed owners and the movement in pricing, the Real Capital Analytics report noted. A price indicator produced by RCA shows that UK warehouse prices are more than 20% above their pre-crisis peak.
Stewart Little, Co-Founder of Oxenwood Real Estate, said: “The EuroLogix event is well overdue and will no doubt become one of the key fixtures of the week where participants of the European logistics market can meet and exchange views. The timing of the launch sits well with Oxenwood’s own expansion into continental Europe as we react to the needs of our customers and the evolution of the sector.”
The UK remains the largest European market for warehouse investment, as it has been for the last 10 years. However, the desire to put capital to work in the sector, driven by cyclical and structural trends in the occupier markets, has spurred investors to markedly spread their geographical focus.
Ben Bannatyne, president Prologis, Europe said: “The European logistics real estate market is accelerating, with the pace of change only expected to increase. Strong fundamentals, favourable market conditions and trends like urbanization and last mile logistics, are lifting markets and driving growth. On a pan-European basis for instance, net effective rents were up approximately 4.5% in 2018, a good indicator of what’s ahead and a clear sign of why warehouse investment is so attractive.”
European-headquartered investment institutions have consistently acquired more logistics assets and oriented their portfolios towards the logistics sector in the last three years, a sign of the growing importance of the sector, RCA’s Leahy said. Data for 2018 show their acquisitions of warehouse properties came close to 10% of their total acquisitions – a new record.
The ongoing move to online retailing, as well as occupiers greater need for supply chain optimization, has driven the emergence of extra-large, big-box, warehouse formats. These are typically in excess of 50,000 sqm let to the likes of Amazon and major retailers and grocers for regional, national and international distribution.
These warehouses are also increasingly being supported by smaller logistical assets, usually less than 10,000 sqm and close to urban areas, used to fulfill ‘last-mile’ and ‘next-day’ type delivery requirements.
Nick Preston, Fund Manager, Tritax EuroBox, said: “Tritax Big Box was the first REIT to provide pure play exposure to the UK Big Box market . Since our EuroBox IPO last year, we’ve been building a high-quality, well-located, portfolio of continental European logistics assets that are expected to deliver an attractive capital return and secure income to shareholders. This expansion has been underpinned by burgeoning rental growth, driven by strong occupational demand and the constrained supply of appropriate assets in key locations.
European markets are generally expected to catch up with the UK’s lead in e-commerce as a proportion of total retail sales and this will power occupational demand for well-located and large-scale highly automated logistics facilities for the foreseeable future.”