There will be no ‘summer lull’ in the logistics investment market this year, as sellers bring assets to market amid a gradual easing of coronavirus lockdown restrictions.
Cushman & Wakefield forecasts that end-of-year European transaction volumes for the logistics and industrial sector could finish at similar levels to last year, in the region of €30 bn.
‘€30 bn looks like a big mountain to climb at the moment,’ says James Chapman, Cushman international partner in EMEA capital markets. However, he believes there will be ‘a surge of activity in Q3 and Q4’ and that this, combined with the strong Q1 for the sector before lockdown and better-than-expected activity during Q2, will mean ‘the usual summer lull will not exist.’
Notable deals that crossed the line in Q2 include: Apeiron Capital with Midas International AM buying the 150,000 m2 ‘Maple’ logistics portfolio in Germany for €200 mln for Korean capital; Hines picking up a 62,000 m2 urban distribution centre in Utrecht; Barings paying €92 mln for four logistics buildings in Norrköping, Sweden, with some substantial vacancy in the 122,000 m2 of lettable space; and Nuveen buying three assets in Marseille, Valence and near Paris in France for €135 mln and 63,000 m2 of industrial space let to an omni-channel retailer near Duisburg in Germany for €60 mln.
Other institutional investors are due to close on further transactions in the next two weeks across Europe including a €200 mln portfolio sale in northern Italy.
Chapman says that sellers readying assets to bring to market in H2 2020 have been encouraged by pricing achieved already this year. ‘The bidding we are getting is definitely at pre-Covid prices and sometimes even better prices.’
While Q2 sales have often been a result of off-market discussion with one or a handful of parties rather than formal marketing going to best bids, Cushman thinks that will change, as will the size of deals, with much larger portfolios now being lined up for sale.
Some were being prepared for March and are relatively easy to restart, meaning they can be launched in the coming weeks rather than waiting for commercial real estate’s traditional second wave of marketing in September.
‘Even three or four weeks ago the closings were primarily deals of €50 mln to €100 mln; now it has stretched to €200 mln', Chapman notes. 'There are some people looking at €400 mln to €500 mln tickets now. There are advantages to size once confidence is back as it is a good way for investors to deploy money (efficiently) this year rather than having to do multiple €50 mln transactions (to get invested).
‘Core product is at the fore, followed by core-plus in late Q3 before value-add product. If the stock is available, I firmly believe that logistics and industrial investments could close on 2019 levels and reach over €30 bn by year-end.’
