Delivery centres present investor opportunity

The growth of online retail is set to trigger significant investor interest in European parcel delivery hubs, according to new research from global property advisor CBRE.

The CBRE report shows that rents for specialist parcel delivery centres - also known as ‘cross docks’ - are often between 40% and 50% higher than for conventional warehouse space. This premium is due to the specialist nature of the properties and their relative scarcity.

CBRE notes that the relatively small scale of the sector has so far attracted little interest from large-scale institutional logistics investors. Yet with the provision of next-day delivery across Europe expected to increase sharply, CBRE believes the sector will create an ‘investment opportunity for investors.’

Recent research has found that 85% of online retailers expect to offer free delivery in the ‘near future’. This will require a network of centres located close to urban markets without the larger storage space associated with traditional warehouses.

The situation, the report says, will present opportunities for investors to acquire assets at initially higher yields than are typical of conventional distribution facilities, and to benefit from yield improvement as the sector matures.

Higher rents are necessary to make the development of these facilities viable - and it appears that rent demands will be met. This trend is already apparent in the UK with the French parcel delivery company GeoPosts’ acquisition of two such properties in North London, paying a premium of between 45 to 50% above comparable traditional warehouses in the same area.

CBRE research director Richard Holberton noted: ‘Until now there has been limited investment into the types of cross-docked property that efficiently services the increasingly rapid delivery of items ordered online. As a result, we expect to see new interest from institutional buyers, and competitive pricing for well located, good quality assets coming to market.’