European logistics real estate matches commercial property in 2012
Logistics real estate performance matched commercial property as a whole across Europe in 2012, with a total return of 4.3 per cent, according to the IPD Pan-European Logistics Performance Report.
Investors in European logistics properties have benefited from a strong income return through recent economic difficulties, standing at 7.1 per cent in 2012 compared to 5.5 per cent for all commercial real estate.
The report, sponsored by BNP Paribas Real Estate and Jones Lang LaSalle, analyses European logistics performance in the past decade. It was produced for distribution at Expo Real, and launched at the event today.
Kevin Mofid, associate director at BNP Paribas Real Estate, says: “We are delighted to sponsor the index, as it brings clarity to the sector and means we are better placed to advise our clients who have an interest in the European logistics market. It will allow the industry to better define logistics and therefore be able to measure performance more accurately.”
There was a clear division in 2012 between some of the larger logistics markets in Northern Europe, in particular Sweden, Germany, Poland and the UK, which performed relatively well, as well as those in more peripheral areas of the continent. Germany and the UK, Europe’s two largest logistics markets, were buoyed through the year by the strength of interest from investors.
For the second year in succession, Sweden recorded the highest logistics return in Europe, reaching 7.9 per cent in 2012. Over the last three years, its return has averaged 10.1 per cent pa, well ahead of its nearest rival the UK, which returned 7.7 per cent pa. Sweden is the only European country where logistics property values have risen in each of the last three years.
Mofid adds: “The countries within the index that have performed well have experienced strong occupier demand, in particular within Germany and the UK. In these markets, take up has remained robust due to companies, specifically retailers, reorganising supply chains driven by the growth of online retailing, which in turn creates a strong product for investors.”
Jon Sleeman, head of EMEA logistics and industrial research at Jones Lang LaSalle, says: “There is strong investor demand for European logistics stock. This is being driven by international investors seeking to enter the market through large platform, joint venture and portfolio deals. There is a strong trend in global investors targeting the European market in order to create scale and increase their exposure to the sector through the agglomeration of logistics assets across a number of key countries.”
The income return on pan-European logistics real estate of 7.1 per cent compared well with the 7.2 per cent recorded for other types of industrial property across Europe. In general, given their age and size, one would expect logistics assets to sit closer to the prime end of the risk spectrum for all warehouse-type assets, so this level of cash flow continues to be a boon for investors.
Mark Clacy-Jones, vice president and head of core research, IPD, says: “Logistics delivered a return in 2012, which matched the overall real estate market, but was driven by different factors. The capital falls in logistics remain larger than in the wider market, however the stronger income return compensates for this. These investment dynamics will be appealing to many investors, particularly if the economic climate continues to steady and consumer spending leads to stronger occupier demand.”
The IPD Pan-European Logistics Performance Report covers 643 individual assets, valued at EUR11.3bn in total at the end of the 2012. The UK accounts for the largest share of value in the report by country with EUR2.9bn, followed by France on EUR2.0bn and Germany on EUR1.5bn.