Big investors spark reshuffle in logistics sector

New allocations from sovereign wealth funds and other big investors are leading to a major reshuffling of existing platforms and vehicles in the European logistics sector.

‘This is a major structural change which hasn’t happened in the preceding five years,’ according to James Markby, director, head of European industrial & logistics investment at CBRE.

Speaking at the PropertyEU Logistics Investment Briefing held in London last week, Markby said CBRE has a dedicated team flying out to different continents to source money for logistics. ‘Every month a new party of a significant size is looking how to allocate in the sector with a decent partner, and that's right through the range from debt, development plays, joint ventures, investments in unlisted or secondary units or direct investments through joint ventures or clubs. It's very interesting to see who's coming out of the woodwork on a more direct basis.'

At end-2012, Prologis announced it had teamed up with the asset management arm of Norway's mammoth oil fund to create a €2.4 bn joint venture which draws largely on the portfolio of its former listed unit Prologis European Property (PEPR). Markby said there was a lot of 'shuffling around' behind the scenes through the capital structures of most of the logistics investment vehicles in Europe, but added that not all the activity would lead to direct asset sales.

'Last year we said over €15 bn is in play or being talked about. In the last quarter of 2012 and the first weeks of 2013, we saw key examples of new capital being allocated to the sector. That trend is going to continue.'

Markby estimates that a total of between €3 to €5 bn in logistics vehicles or portfolios has changed ownership in the past three months. He is forecasting a similar amount of activity in the next couple of quarters as a number of closed-end vehicles and debt structures reach maturity. However, increased competition will ultimately lead to more constrained supply, he noted. ‘There will be increasingly fewer avenues in terms of managing that risk and getting access to the sector in a meaningful way.’

While many larger investors are keen to team up with the bigger global or Europe-wide platforms, Markby said there was ‘definitely’ still space for smaller development players to do very well in the market. 'You always have very good domestic and local players who are competitive; they may have just as good a site secured or a better relationship with a local municipality. We also see core investors looking to cherry pick with selected developers in key markets. There’s still room for smaller players, but equally there are clear advantages to having scale in terms of the size of the portfolio and asset management business combined with the development business. This allows a different set of customer service and after care that big occupiers like.'

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