Record levels of investment for European industrial and logistics in H1 2016
The European industrial and logistics investment market experienced a record breaking amount of investment volumes in H1 2016, despite a slower Q2, according to the latest CBRE Industrial and Logistics MarketView. Lower than average activity in the UK amidst Brexit uncertainty meant logistics assets only made up 45 percent of total turnover, instead of the usual 60 percent, but the first half performance highlights the importance of this asset class.
According to the research, occupier demand held up well in H1 2016, despite a slowdown in activity during Q2, which in some markets, including the Netherlands, was quite pronounced. Other core markets performed strongly including Germany, Italy, the Czech Republic and the UK. Net absorption throughout Europe has remained positive, pushing vacancy rates down to a weighted 5.5 percent. In addition, many of these leading areas lack availability for modern warehouses or city depots, which has resulted in strong development activity and an increased share of speculative development in the areas, giving a further boost to said markets.
Prime yields declined further in Q2, led primarily by Germany, France and Spain. Ahead of the Brexit vote, prime yields appeared to bottom out entirely, but a renewed downward pressure on interest rates is likely to reverse this effect. Nonetheless, investors are growing to be more risk averse, which is beginning to impact secondary values.
Machiel Wolters, Head of Research, Industrial and Logistics, EMEA, commented: “While this quarter of the year was calmer, the industrial and logistics sector witnessed a record breaking amount of investment transactions in the first half of 2016. We continue to see a rise in development as a result of this demand, and new construction is providing a welcomed replenishment for Europe’s tight logistics market. Anticipation of the EU referendum stemmed market uncertainty in Q2 and impacted a wide variety of sectors. However now that the dust has settled, we anticipate the sector will gain further traction across investors throughout the European markets.“
Anton Alyabyev, Director of I&L Department of CBRE in Russia, commented: “Despite low share of industrial and logistics investment volume in H1 2016 in Russia, at 5.7 percent, there is still high investor interest to the sector. Noteworthy, the only deal with foreign capital was in this sector, Mubadala Development bought two buildings in PNK-Severnoye Sheremetievo and PNK-Chekhov III. Moreover, many end-users, in particular food retailers, using current situation to buy premises for future business development. Both, investors and occupiers are motivated with the fact that industrial and logistics sector is at the bottom now, and is expected to recover quicker compared to other sectors, as most of developers are constructing premises only for secured demand on a built-to-suit basis.”