Interview of Delphine Le Corno, Property Valuer France, International Department, and Logan Smith, Head of Logistics, International Investment Europe.
HOW WOULD YOU SUM UP 2015 IN NUMBERS FOR THE LOGISTICS MARKET ?
Delphine Le Corno :
- The user market is faring well, with 3.1 million m² taken up in France
- Warehouses with more than 40,000 m² accounted for 26% of supply taken up in in 2015.
- Available supply came to 3.3 million in January 2016, or 11% less than in 2014.
- Stable rental values, between €44 and €52 per m² in Greater Paris and between €41 and €49 per m² elsewhere in France.
- France held onto its third place in Europe with €2.1 billion invested domestically, a 105% increase and a solid performance compared to the decade’s average of €1.8 billion euros invested annually.
Logan Smith :
- Take up increased by 28% in Europe in 2015
- Germany is the No.1 occupier market with a take-up of 5,2 million sqm
- At city level, Greater Paris is the No.1 market and Birmingham is No.2
- €26.7 bn was invested in the European logistics market
- The UK represents 36% of total European logistic investments – this was the second best volume ever recorded
- Apart from Portugal and Spain, prime yields are nearing new lows in most Europeans countries loosing between 5 and 100 bp since 2014
WHAT ARE THE MAIN TRENDS ON THE INVESTMENT MARKET ?
Delphine Le Corno : There were two main trends on the logistics market in late 2015:
Strong investor appetite for the French market, which continues to offer competitive profitability compared to its European neighbours, with prime yields of 5.80% and average yields of about 7.70%
The increase in deals involving portfolios, whether within France or pan-European. For all of 2015, portfolio transactions accounted for 75% of deals, including the Viking and Nautilus portfolios acquired by CBRE GIP.
Logan Smith : The logistics market remained extremely strong in 2015 as investor appetite outpaced supply in all markets. Core product has of course been in demand for years, but more recently investors seem to better appreciate new ways to invest wisely in this project type. For example, forward funding and development are being aggressively executed.
HOW WOULD YOU ANALYSE THE IMPACT OF E-COMMERCE ON THE LOGISTICS MARKET ?
Delphine Le Corno : Recent years have seen an expansion in XXL warehouses needed for the booming e-commerce sector, with a 14.3% increase in revenues in 2015. Warehouses take up a lot of space and accounted for almost 40% of supply taken up in 2015. Meanwhile, these warehouses have attracted investor appetite, like portfolios, due to their unit amounts.
Logan Smith : The impact of ecommerce on logistics real estate is profound. E-commerce requires more logistics space than traditional retail, and it has accounts for a significant amount of absorption in the sector. It is also important to be aware that we are still in the early stages of e-commerce. It will continue to grow and to have profound impact in the years to come.
ARE THERE ANY OTHER KEY POINTS THAT YOU WOULD LIKE TO HIGHLIGHT ?
Delphine Le Corno : One last point on interest rates. After a very strong 2015 on the logistics investment market in France, BNPP RE Valuation expects yields to stabilise during 2016 and even a slight compression on deals involving prime assets.
Logan Smith : Another trend from 2015 was the increasing awareness from many logistics operators that they can profit from the value created by the length and credit of their leases. There were a number of core sale leasebacks that will likely set the stage for additional deals next year.