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European logistics driven by UK performance in 2013

The strong (16.4 per cent) performance of the large UK logistics market led Europe to be the world’s best performing sector during 2013, according to the IPD Pan-Europe Annual Logistics Index. 

European logistics delivered an 8.7 per cent return, substantially higher than offices (5.4 per cent), retail (6.1 per cent) and all property (5.9 per cent), and the best annual return for the sector since 2006. 
The strong UK performance also masks significantly weaker performance across other European markets.  The 8.7 per cent return was based on an income return of 7.1 per cent and capital growth of 1.5 per cent, but this was driven by 8.8 per cent appreciation in the UK.  Capital growth was negative in 11 other European markets, particularly in Spain and Hungary where values fell by 4.0 per cent.  The worst performing European market was Portugal, with a combination of low income returns and value declines leading to a 0.0 per cent total return for the year as a whole. 
Although 2013 was a strong year for European logistics, the differences across Europe and the spike in appreciation in UK returns point to the potential volatility of the sector.
Peter Hobbs, managing director and head of research at IPD says: “While logistics benefit from a high income yield, it has tended to benefit, and suffer, from marked variations in capital flows that pushed values in the run-up to the financial crisis, and led to a significant correction through the downturn.  This capital market volatility means that logistics has, perhaps surprisingly for many, been one of the most volatile sectors over the past decade.”
The IPD Pan-Europe Annual Logistics Index covers 19 countries and is comprised of 985 properties valued at EUR16.9 billion. The index defines logistics properties as distribution warehouses built in 1998 or later and that are over 10,000 sq m.

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