EUROPE - The European logistics market will diverge into ‘blockbuster' and ‘niche' funds, with specialist nous and tenant relationships determining asset managers' survival in a shaken-out market, claims Peter Davies, fund director of the Goodman European Logistics Fund (GELF).

He told IPE Real Estate: "You can see the emergence of two dominant players - us and Prologis - and the market could become dominated by bigger funds." Prologis's investors include Danish pension scheme ATP, which in September committed €200m to the firm's second European logistics fund.

"It all comes down to how it affects tenants," said Davies. "Customer relationships are very important in logistics funds because it all depends on repeat business. Tenants want to grow their business and we want them to stay with us.

"We don't pretend to be ING with 60 funds and we're not trying to bolt on logistics. This is what we do and we aim to be best in class. Knowing what you're doing is very important," he added.

His comments followed the merger of two of the firm's funds - the €243m Celogix fund, acquired with Arlington, and GELF, launched in December 2006. The merged €950m GELF has a portfolio of 45 logistics assets in nine European markets.

"There's no reason to have two funds in the same sector in the same asset class - especially when they have common investors. They would have started to compete against eachother," said Davies, adding the GELF wrapper was "the most obvious route".

More than 50% of investors have taken up the option of units in the newly-merged fund. "They understood why we were doing it. There was no gun against their heads. From the investors' perspective, the merger makes perfect sense," he said.

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