Private equity real estate firm Meyer Bergman has launched a new logistics platform, dubbed Crossbay, which is planning to amass €2 bn of European last-mile assets to tap into surging demand for strategically located distribution centres.
Headed by Marco Riva, who led more than €2 bn of deals while at Logicor, Blackstone's former logistics arm, Crossbay hopes to be the first pan-European real estate platform targeting single tenant assets in gateway cities. While operating seperately, the platform is an extension of Meyer Bergman’s urban mixed-use strategy which has managed more than €8 bn of assets across Europe.
Marcus Meijer, chief executive of Meyer Bergman, said: 'Demand from e-commerce, online grocery shopping and third-party logistics businesses has soared in recent years. This is a structural shift. Conviction investors rightly see a return premium given the lower level of risk in this property type coupled with continued growth in occupier demand.'
Recent deals
Including its near-term pipeline, Crossbay already has over €500 mln assets under management, with properties in Italy, France, Germany, Spain, Belgium and the Netherlands. The portfolio enjoys an occupancy rate in excess of 97% and weighted average lease break of five years, with tenants being a mix of 3PLs (such as FedEx and DHL) and e-commerce brands (including Amazon).
Having recently secured assets in France and the Netherlands, Crossbay is also targeting gateway cities in Southern Europe south such as Milan, Rome, Madrid and Barcelona. E-commerce penetration in Italy and Spain has lagged behind the UK and Northern Europe. Additionally, Meyer Bergman is identifying opportunities in the Nordics and around London, where supply has been extremely restricted.
The firm believes Crossbay is on course to double its assets under management to €1 bn over the next 12 months.
'We are creating a long-term institutional platform that will work in parallel to our traditional value-add strategy. For the first time, pension funds will be able to access high quality assets, with grade A occupiers managed by an institutional-grade operator,' Meijer added.
Last mile strengths
According to the firm's research, industrial real estate has been one of the most popular property sectors over the last few years as retailers have adopted omni-channel formats and consumers have increasingly switched to online shopping. However, large warehouse occupiers remain sensitive to the economy – particularly the manufacturers of industrial goods.
Last-mile assets are 'more insulated from GDP movements for several key reasons', the firm notes, as developing new last-mile distribution hubs remains difficult, due to planning restrictions. Meanwhile, most goods distributed through last-mile hubs go direct to consumers – something likely to significantly increase post-Covid-19. Occupiers also take long leases and pay a premium for the best locations because speedy access to customers gives them a competitive advantage.
'Although we began our last-mile journey in 2018, Covid-19 has highlighted how integral urban logistics are to all aspects of life. As companies look to reassess their supply chains, we will see significantly enhanced investment targeting this area,' said Meijer.
Retailer relations
Marco Riva, head of logistics at Meyer Bergman, commented: 'More than ever, retailers need to be close to their customers, so that is why tenants are willing to sign up to longer leases and pay competitive rents for well-located space. Last mile deliveries make up a significant proportion of retailers’ costs, and every mile and every minute’s delivery time creates expense.
'Online shopping will grow substantially across Europe, including in southern European markets such as Italy and Spain where e-commerce penetration has traditionally been lower. In addition, the just-in-time inventory models that failed to adequately supply consumers and governments during the Covid-19 pandemic will also be re-evaluated. This will all lead to a substantial growth in demand as Europe structurally realigns its retail and supply chain networks.'
Meyer Bergman's move echoes Blackstone's initiative, Mileway, launched in September 2019, which is targeting €8 bn of last mile assets across the bloc.
Other private equity firms with a track record in retail, such as Thor Equities, have also increasingly pivoted towards logistics and last mile assets in recent months.
