EUROPE - Logistics is still outperforming other European sectors despite a 12% fall in direct investment last year compared with 2006.

The European Logistics Report, published by Jones Lang Lasalle, claims direct investment in the sector totalled €15bn in 2007, despite a 35% drop in transactions to €4.3bn in the UK - Europe's largest logistics market.

Of the other ‘Big Three' markets, German transaction volumes increased 5% to €2.3bn, while those in France doubled to €1.86bn. Dutch transactions rose 30% to €1bn.

Aymeric de Sérésin, a director of Jones Lang LaSalle's European investment team, told IPE Real Estate transaction volumes in Q1 were the result of "people waiting. It's just a question of pricing."

He said: "I'm not concerned about the market. The issue will not be investor appetite - it will be price."

Despite forecasting difficulties across all sectors in 2008, de Sérésin said still liquid investors were looking to invest.

 "In Europe, at the moment, people are sitting on €1bn of cash. The question is what they're going to do with it. There is limited property coming to the market. Potential sellers don't want to sell when receipts are so high," he said.

Although investor appetite is emerging for non-European logistics assets, for example in Vietnam, de Sérésin said most European investors would continue to invest within the Eurozone.

"Global investors might go to Asia but pan-European investors don't necessarily have the Asian option," he said. "Investors are more aware of Eastern Europe, in terms of the risk premium and the limited availability of assets. They'll look towards mature Europe."

Limited investment opportunities in Central and Eastern Europe have pushed down yields - and the risk premium - in that region. Although investment volumes rose 50% across the CEE region in 2007, Russian investment activity dropped 90% in 2007 over the previous year, despite that market recording the highest levels of new supply.

The report's authors forecast Germany will likely see the highest growth in supply in 2008.

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