European logistics market on the up
Review says logistics property is a must-have due to outperforming the market
A review of the European logistics property market by Catella shows the COVID-19 pandemic has placed the European logistics sector into a strong position in the medium and long term. The report’s authors says that the sector’s resilience and importance make "logistics" a strategic must-have investment at present.
"Booming e-commerce", intensified by the side effects of work from home, and the dramatic upheavals among department store providers in Europe are creating a positive situation to investors. The still existing excess returns compared to other asset classes and the constant shortage of space continue to drive investor demand.
Production and distribution relocation is moving closer to European conurbations, putting urban and near-urban space at a premium.
This transition of logistics properties away from a niche segment to a sustainable investment class is occurring at a rapid rate say the report authors.
There is, however, wide disparity in the available prices and yields for industrial properties throughout Europe, although yields typically come out around or above 4% across Europe:
- Currently the European average yield is 5.41%, ranging from 3.7% in Berlin, Germany, to 8.5% in Tartu, Estonia.
- The current European top rent averages €5.62/sqm while the respective willingness to pay for one square meter of logistics use ranges from €3.40/sqm in Lodz, Poland, to €16.50/sqm in London.
- In the top regions of Germany, the prime yields for logistics properties have now fallen well below the 4% mark.
- Many Mediterranean cities are also showing significant discounts; Marseille is even showing a drop in yields of 125 basis points to 4%.
- Rising prices can also be observed across the board in Poland and the Czech Republic.
- The highest yield values can be found in in the three Baltic countries with prime yields of 7.25%.
- The Nordic markets still appear relatively cheap compared with their European counterparts, with Copenhagen (5.0%), Helsinki (5.2%) and Stockholm (4.6%) in particular experiencing further yield compression.
- Price levels are more or less stable only in the UK, Italy and Poland. The logistics region of London continues to generate by far the highest rents, with the yield remaining unchanged at 4%.