Changes in the characteristics of the European logistics property market have continued to boost the scale and quality of investable stock and are contributing to the sector's rise as an institutionally acceptable investment medium, according to latest research from CB Richard Ellis (CBRE).
Changes in the characteristics of the European logistics property market have continued to boost the scale and quality of investable stock and are contributing to the sector's rise as an institutionally acceptable investment medium, according to latest research from CB Richard Ellis (CBRE).
These changes relate to the sector's potential liquidity and investor base, and the quality of both available assets and the market’s occupier base. For instance, the expansion of outsourcing to third party logistics specialists (3PLs) has contributed to the growth in activity by specialist investors, particularly as world trade and regional infrastructure have developed. In response, the sector now accounts for around 10% of the European property investment market compared with only 6% in 2006.
Richard Holberton, director of EMEA Research, CBRE, said: 'Changes in the industrial sector's occupational and investment characteristics have made the sector more attractive to institutional investors and have clearly affected pricing. Prime yields over the past 10 years have been around 70 basis points lower than the long-term average, based on a 20-year history. Spreads between logistics and office yields have also narrowed. These factors will influence investors’ views on potential future returns from the sector.'
The number and size of pan-European institutional funds and investors now looking at the opportunities offered by European logistics property has grown.
James Markby, director of European Industrial & Logistics, CBRE, said: 'Institutional investors are increasingly attracted by the sector’s income performance. Although it has generally lower rental growth characteristics, the fact that the sector's income return has been more than 1.5% higher than the all-property average since 2001 is an attractive feature in an uncertain economic environment. Yet in the current market, there are two potential issues: investors and developers are increasingly holding onto assets, and there remains a tension between book values and realisable pricing when marking to market.'
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