A total of €8.7 billion was invested into European industrial real estate during H1 2014, a 25 percent increase versus H1 2013, and the highest first half total since 2007. New data from global real estate advisor CBRE also shows that industrial property now makes up 10.3 percent of the real estate investment market, up from 9.5 percent in 2013.
In terms of location, the UK continues to capture the lion’s share of industrial investment, with the €3.46 billion invested in the sector this year (40 percent of total investment). Germany, France and the Netherlands also saw significant activity over this period.
The Nordics performed particularly well in H1 2014, with €878 million invested into the region, an almost 50 percent increase on H2 2013. The region began the year well with the highest quarterly total since 2007 in Q1 2014 and continues to attract large amounts of capital with high value sales, including a transaction of over €200 million in Sweden in the second quarter of 2014.
James Markby, Head of EMEA Industrial and Logistics Investment, CBRE, commented: “The industrial sector’s continued growth in terms of both total investment and percentage of market share reaffirms its position as the sector which can generate attractive sustainable long term income returns, while also benefitting from capital growth along with the rest of the market. Many institutions are just beginning to allocate capital to the sector, and those that are already participating are looking for further increases.”
He added, “All areas of the market are functioning well, the transaction pipeline and size of deals is growing and the occupier led development cycle is starting to produce some very interesting dynamics again. Lack of available stock is now the challenge to satisfy investor and occupier demands.”
On the occupational side, industrial take-up rose across most countries in the first half of the year. Demand for warehouse space in core EMEA countries increased 42 percent year-on-year. Paris, Milan and Budapest saw the strongest improvements in leasing activity, followed closely by Dublin and Amsterdam.
Amaury Gariel, Head of EMEA Industrial and Logistics, CBRE, commented: “One reason for the uptick in leasing transactions is that corporate funding is becoming more affordable and the economic outlook is much more positive. Therefore real estate decisions, which had previously been put on hold, or addressed through temporary solutions, are now back at the top of boardroom agendas.”
“While demand is improving, there is still a mismatch between supply and demand. The availability of modern stock in well located areas is limited, which leaves occupiers with the option of taking space in secondary locations, or initiating a build-to-suit project. Therefore most newly completed space tends to be build-to-suit, although we are now seeing renewed appetite and some speculative development in the more strategic western European markets.”
Valentin Gavrilov, Director of Research, CBRE in Russia, said: “Increasing interest in European logistics property is explained by expectations of the ending recession in Europe. In this regard the eurozone follows Russia with some lag. In 2013 investments in industrial and logistics property in Russia reached 19 percent compared to 10,3 percent in the eurozone and amounted to $1,34 billion. In 2014 Russian developers have remained very active in the delivery of new projects. However, demand is currently under influence of “war of sanctions”, leading to potential increase in vacancy above 8 percent. The same calming influence on investment activity might occur in Europe, as well, as its economy already feels negative impact from sanctions. Nonetheless, we might witness a recovery in the industrial and logistics market balance in both markets in 2015, which might trigger further intensification in investment activity.”