Momentum in European logistics and industrial real estate investment continued in Q3 2013 when more than €4 billion was invested – second only in volume to the exceptional Q2 2006 (€5.6 billion). As a result, 9M 2013 investment volumes, at over €10 billion, were a substantial 73% ahead on the equivalent period last year and also 16% higher than 2012 full-year volumes.
Rising levels of investor confidence as the world economy regains some vigour, coupled with intensified competition from a wider range of investors meant Jones Lang LaSalle has adjusted its projected transaction volumes for the full year to exceed €14 billion, the highest volume since 2007.
“We continue to see growth in transactional activity and investor appetite in the sector. Several factors are driving this, most notably the weight of money targeting core and emerging markets, improving property fundamentals in many markets and a slow increase in available opportunities. The sharp spike in investment volumes is being driven by the demand for large lot sizes and portfolio transactions.” says Tom Waite, Director, European Capital Markets, Jones Lang LaSalle.
“Investors are attracted by the sector’s robust income return and growth opportunities based on current strong demand and supply dynamics in the occupational market” he adds.
Investment continued to expand in the UK (+35%; €3.1 billion) and Germany (+26%; €1.6 billion ) whilst declining a modest 5% in France (€0.9 billion).
Meanwhile, capital continued to spread to a greater breadth of geographies in Q3 2013 and transaction growth in smaller markets picked up in Southern Europe. Volumes already more than doubled over 2012 as a whole in Russia in 9M 2013 to €770 million whilst an €155 million injection in CEE markets in Q3 meant 9M volumes rose 30% year-on-year.
“With e-commerce at front of mind for many retailers, we continue to see strong appetite for logistics and industrial assets as investors look to expand their exposure in the sector to diversify their portfolios. This is in part driven by a structural shift in the logistics market that continues to support the sector developing into an established real estate investment market – around two thirds of the invested capital in the year-to-date went into logistics assets” comments Alexandra Tornow, Associate Director, EMEA Logistics & Industrial Research, Jones Lang LaSalle. “Investors are also increasingly prepared to take more risk, in particular with pricing continuing to tighten in the core markets. We expect to see more opportunistic transactions over the coming quarters along with a continued spread into smaller markets” she adds.
Further yield compression for prime logistics assets was recorded in Q3 2013 in markets across Germany (-15bps), France (between -5bps to -10bps), Dublin (-25bps) and select UK regions (-25 bps).