European industrial investment down 50% in H1

Total direct industrial real estate investment volumes in Europe amounted to EUR 2.2 bn in the first half of 2009, reflecting a 45% fall on H2 2008 and a 50% fall on H1 2008, according to Jones Lang LaSalle’s latest European Industrial Markets Autumn 2009 report.

Chris Staveley, head of the Pan European Capital Markets team at Jones Lang LaSalle, said: 'Although overall investment activity remained subdued in the first half of the year, in the second quarter investment volumes stabilised with a pick-up in investor sentiment significantly more positive than transaction volumes would suggest. Whilst a full recovery will depend on debt markets, and occupational markets, which look set to remain weak for some time to come, we anticipate transaction volumes to carry on improving with investor interest focussed on a narrow band of prime assets in core markets.'

Largely due to a strong price correction since the end of 2007, the UK industrial market saw its market share grow significantly, accounting for half of the total European volume invested in industrial assets in H1 2009. The core Western European markets, on the other hand, recorded only EUR 750 mln of transaction volume, reflecting a fall of 61% on H1 2008 and by 40% on H2 2008. The sharpest drop in investor activity was in Germany where it was down by 80% on H1 2008 and by 86% on H2 2008.

The report findings also suggest that industrial yields appear to be on the verge of stabilisation. In Q2 2009, the Jones Lang LaSalle weighted average European prime logistics yield stood at 8%.This follows outward shifts of 60 basis points (bps) in Q4 2008 and 40 bps in Q1 2009, with a further 30 bps outward movement continued to ease in Q2 2009.

Staveley added: 'The UK has been the first market to record a hardening of yields as competition has increased for prime assets. A number of markets, mainly the core Western European ones, are now starting to fall in line with their long-term average yield level whilst other markets continue to record yield levels that are lower than their long term average. However, many of these, in particular the Central & Eastern and Southern European markets, have been through a maturing process in recent years and, as a result, are expected to see yields stabilise below their long term average.'