Logistics investment volumes have increased from €1-2 bn 15 to 20 years ago to €25 bn in 2016, and there is likely to be even more growth over the next 15 years, PropertyEU's latest briefing on the sector has heard.
The huge rise in investment capital flowing into the logistics sector reflects an increase of between 1,150% and 2,400%.
'It's been a very interesting time in the sector,' Logan Smith (pictured), head of logistics at BNP Paribas Real Estate's European international investment group, told the audience at Provada's International Business Lounge.
'The sector has withstood all of the challenges and issues such as Brexit, Trump, and all the problems that we thought we were going to encounter in the last couple of years, and truly it has got to the point now where a lot of people are looking at the sector.'
He said that the logistics investment volume was around €1-2 bn about 15-20 years ago. Last year investment the figure stood at about €25 bn, meaning logistics and industrial property accounted for about 11% of commercial property in Europe.
Investment into logistics has been growing about 10% annually for many years. Smith noted that it was reported earlier this week that China Investment Corporation is the front runner to acquire Blackstone's Logicor European logistics platform for €12 bn.
This will be the largest logistics deal, towering above even the acquisition of P3 Logistic Parks by Singapore sovereign wealth fund GIC for €2.4 bn earlier this year, and GIC's purchase of Blackstone's US logistics platform, IndCor, for about $8 bn in 2014.
'The Logicor deal, Smith said, will also probably be one of the largest commercial property deals ever in Europe. This single deal alone will amount to about half of the annual volume in Europe, he added.
Investor interest
Much of the increasing investor interest stems from the explosion of e-commerce, Smith and the other panellists told the briefing. 'E-commerce is really representative of a lot of the trends going on right now and the next interesting thing is that whatever happens in the next 15 years is probably going to be more interesting than the last 15 years,' Smith said.
E-commerce is experiencing about 12% growth a year, and a Prologis study indicates e-commerce requires three times more warehouse space than traditional retail. However, supply of warehouse space per capita in North America is three times that of Europe, meaning that the European logistics sector appears undersupplied, more so than any other property type.
'Sheds are now sexy,' said Tim Davies, head of EMEA industrial and logistics agency at Colliers International. 'E-commerce has catapulted the sector into everybody's attention.'
Davis said e-commerce accounts for about 20% of retail activity in the UK and this is expected to grow to 50% by 2024. 'We might reach this figure sooner than that. And, if that happens in the UK, it will happen in EMEA as well'.
Dirk Sosef, head of research and strategy at Prologis, characterised the logistics sector as having transformed from an 'ugly duckling into a swan' over the last 10 years. He added that e-commerce accounted for 20% of new leases signed by the global logistics developer-asset manager annually. Aside from e-commerce another big draw for investors is that vacancy rates for logistics space across Europe stand at about 5%, the lowest level ever seen.
