EXPO REAL: European Logistics Investment Briefing A2.232 - International Investors Lounge by PropertyEU - EXPO Real, Messe München GmbH, Messegelände, Munich, 81823, Germany | 12:30 - 13:30

Logistics still has ‘the feel-good factor’

The logistics sector still has the feel-good factor, panellists agreed at the PropertyEU European Logistics Investment, which was held at EXPO REAL in October.

‘In 36 years in this business I have never seen such a great market as we have now,’ said Ian Worboys, CEO, P3 Logistics Parks. ‘We see strong demand from occupiers, occupancy rates are 97%-plus and there isn’t much supply. Only external factors like trade wars or interest rates could spoil the picture.’

Logistics is now an established asset class that is attracting investors from all over the world, said Anita Simaza, director European logistics investment, International Investment Group, BNP Paribas Real Estate.

‘Investor demand is very good, all the way from core to value-add,’ she said. ‘The fundamentals are strong and we are optimistic about the sector because the trend is for more people to shop online.’ Sub-sectors are now emerging, like robotics for e-commerce or last mile logistics.

‘Logistics is the asset class that is most in demand now,’ said Philip Dunne, head of logistics EMEA, CBRE Global Investors. ‘The supply chain is in constant evolution. We like urban logistics and big boxes as well, but it is clear that we need to be close to the great logistics corridors and the large population centres.’

Urban logistics has to compete with office and residential for increasingly scarce space in or near European cities. ‘We are focusing on the last mile to add to our existing portfolio, but it is very difficult to find sites near urban centres,’ said Ben Bannatyne, president, Prologis Europe.

Urban logistics is still in its infancy, still growing and evolving, he said. ‘We are pushing rents where we can in these urban locations and I don’t think we are anywhere near the limit.’

Given the strong demand and the land constraints, especially in cities like Paris or London, the way forward for urban logistics might be ‘the Japanese model of multi-level with ramps’, said Dunne.

According to Worboys it is not enough to ‘put a new sticker on an industrial building and call it urban logistics’. Specific buildings are needed and former retail spaces might be the best ones to convert, as they have the necessary parking facilities.

‘In Germany we have full occupancy in our portfolio and we are confident that such demand will continue,’ said Katrin Poos, managing director, RLI Investors. Fifty per cent is e-commerce, the other half omnichannel occupies. The most in-demand sector is urban logistics.’

Finding space or land is now a big challenge everywhere in Europe. ‘We are one of the most active developers in the sector, with 2 mln m2 under construction,’ said Robert Dobrzycki, CEO, Panattoni Europe. ‘But it is difficult. Land prices are going up and construction costs have risen as much as 20% in the last year in some markets.’

Finding and attracting workers is the sector’s other big challenge. Logistics is driven by the growth of e-commerce, and e-commerce is much more labour-intensive than traditional warehousing. ‘The human component is becoming more important and availability of labour is now determining the choice of locations,’ said Dobrzycki. ‘Patterns are changing.’

Strong demand, lack of supply and full occupancy rates ‘like we have never ever seen before’ are leading to rental growth, said Bannatyne: ‘It has been strong in the UK in the last two years and now it is finally coming to mainland Europe, especially Germany, the Netherlands and parts of Eastern Europe.’

The prospect of good returns and the sector’s good fundamentals are driving investment. ‘We are seeing rental growth in many areas and we have rebalanced our portfolios, downgrading retail and upgrading logistics and alternatives,’ said Mahdi Mokrane, head of European research & strategy, LaSalle Investment Management.

‘We are forward funding development and funding through debt, we are happy to take the leasing risk. The logistics sector has a real feel-good factor.’