LOGISTICS BRIEFING 'Opportunity to make money has never been better'

The mood was distinctly bullish at PropertyEU’s European Logistics Investment Briefing, held at the London office of Savills on Tuesday.

The logistics sector is on a roll and the good times are set to last for at least a decade, Logan Smith, head of logistics in the international investment group at BNP Real Estate, told the briefing.

‘There has never been such an opportunity to make money in logistics. The sector has not been so attractive or fascinating for at least 15 years, and we see growth continuing. It is the only sector in real estate where we can say we are grossly underserved in product.’

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Click here to watch video highlights of the European Logistics Investment Briefing

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Logistics is now regarded as a good asset class, attracting 65.2% of investors, according to Savills, with €10-12 bn of investments every year and two-thirds of capital still going to Western Europe, where the consumers are.

‘It used to be a niche sector, but now it is a core product and attracting significant amounts of capital,’ said Ingo Spangenberg, director of industrial investment at Savills.

Logistics now accounts for 11% of commercial property, a steep increase from the 1% it was recently but ‘it is not going to stay at 11%, that is for sure,’ said Smith.

A European economy on the mend, increasing consumer demand, the growth of urbanisation and the rise of ecommerce are all solid fundamentals which are underpinning logistics, said Tristram Frost, consultant at Garbe: ‘There is a level of comfort built into the sector that is just not present in any other real estate sector, and demand will push up values.’

There is demand across the board: from large warehouses to small urban fulfilment centres, and from online retailers but also traditional manufacturing businesses. Two examples are the growth in demand from export-oriented manufacturers in Germany, which last year pushed take-up to 6 million m2 and over the €4 bn mark for the first time, and the positive ripple effects to the supply chain from the success of the automotive sector in the Midlands in England.

But the bulk of future growth will be led by ecommerce, with European online sales set to rise to €233 bn in the next four years, according to Forrester Research, and 94 million m2 of additional warehousing being required by 2020. As ecommerce requires three times as much space as traditional logistics to accommodate stock, conveyor belts, high-tech equipment and workers, it is easy to work out that demand will soar.

‘We are in the early stages of what can only be described as a revolution, if that is not too grand a word,’ Smith said. ‘Logistics is now a respected, grown-up asset class. I predict that the investors who are now putting money into offices and residential in 10 years’ time will look at logistics first.’