Logistics properties seen as crisis winners but not without risks says survey
Managers for logistics investment funds see strong fundamentals for the overall market and consistent returns, although there has been some softening of rents due to the economic crisis resultant from the pandemic
Although the mood among providers of logistics investments has clouded over slightly due to the crisis, almost threequarters of those surveyed expect rents for logistics properties to rise over the next three years. These are the findings of a new survey published on the logistics real estate market.
A survey by Scope of 16 providersof logistics investments managing more than 380 billion euros in real estate has found positive sentiment for 2020 and 2021 for all segments in which they are active.
However, their mood is subdued compared to the previous year due to the crisis. This applies in particular to providers in the project development sector.
Overall, due to the trend towards online shopping, which has been accelerated by the crisis, logistics investments are considered to be much more robust than the retail and hotel sector, for instance.
As a result of the crisis, investors are paying more attention to the sectors in which the tenants of logistics properties are active.
While online retail, food and pharmaceutical logistics are relatively crisis-resistant, the letting risks in the automotive industry including its suppliers and in mechanical engineering have increased.
Rising rents expected – at least for the next three years
Despite the coronavirus crisis, 73% of those surveyed expect rental prices for logistics properties to increase in the next three years, against 27% expecting stagnation.
The development of rents will vary depending on location and economic structure. Good locations in metropolitan areas will become more expensive, while logistics centres in rural areas will be less in demand.
Regions with an industrial character and dependence on crisis-prone sectors are more likely to experience declining rents.
In the short term, however, supply rents have fallen. From the beginning of the year to June 2020, prices fell by 8.6% and year-on-year by 3.4%. Only the metropolitan area of Berlin, which has the least industrial character, was excluded from this development and even shows a significant increase in supply rents in June 2020 compared to the beginning of the year by 14.5%. Sixty percent of those surveyed expect returns of between 4% to 5%.
Germany remains in focus
Germany remains the most attractive logistics location for investors in the European context. 56% of those surveyed consider it attractive and as many as 44% consider it very attractive. Germany remains by far the largest market in Europe.
The geographical location, infrastructure, economic performance, high technological standards and, last but not least, the large number of inhabitants with relatively high purchasing power also work in its favour.
Digression: open-ended mutual property funds plan more logistics properties
In addition to the logistics real estate market survey, the Scope rating agency asked the managers of open-ended real estate funds about the likely development of the shares of types of use in the portfolios in spring 2020.
The results found that 44% of the providers of open-ended real estate funds plan to increase their purchases of logistics properties in the next three years. Only 6% expect sales.
By contrast, the intention to sell is predominant in the case of retail properties. 22% of those surveyed are considering selling and only around 17% expect to buy.
Download the full report, including charts, here.