European Industrial Investment Second-Highest in Last Decade

European Industrial Investment Second-Highest in Last Decade

Commercial News » Europe Commercial News Edition | By Francys Vallecillo | March 3, 2014 10:46 AM ET

Investments in the European logistics and industrial markets totaled €15.2 billion in 2013, increasing 73 percent from the previous year, and marked the second highest volume in the last 10 years.

The share of logistics and industrial investment increased to 10 percent of all commercial real estate volumes, growing from a five-year average of eight percent, according to a report from Jones Lang LaSalle.

"The spike in volumes was fueled by an improving macro-economic landscape, falling vacancy levels, a tightening of supply and occupational demand driven by factors such as the continued growth of e-commerce and changing shape of retail markets,"  Tom Waite, Director European Capital Markets in JLL, said in the report. "This has led to some downward yield movements in a number of markets, which we expect to see continuing in 2014."

The ability to build scale across the region, the returning availability of debt and the possibility of capturing rental and capital growth continue to attract investors, Mr. Waite said.

Platform and portfolio deals accounted for almost half of the total volume in 2013, increasing a whopping 130 percent year-over-year as the range of international investors seeking more exposure grows. 

On the other hand, inter-regional capital flows increased to €6.2 billion, growing 77 percent from 2012.

Europe's traditional markets - the U.K., Germany and France - continued to dominate in 2013. However, investors ventured into deals elsewhere due to a lack of prime product and continued yield compression in the top markets.

In 2013, investment volumes outside of the top three markets accounted for 45 percent of all volumes, increasing from a 30 percent share in 2012.

Full-year investment volumes in the Nordic countries and the Benelux increased by a strong 84 percent and 44 percent, respectively. Russia, meanwhile, recorded €800 million in transactions last year, dominated by a small number of domestic investors.

In the final quarter of 2013, strong investor demand led to the weighted European average yield moving 10 basis points quarter-on-quarter to 7.30 percent.

The firm expects to see strong logistics and industrial transaction volumes this year, which are forecast to exceed the 2006 peak of €16 billion, with occupier demand for logistics units driven by structural change in supply chains.

"Short term this change will be dominated by the evolving e-commerce markets as retailers are now forced to offer an omni-channel retail experience to their customers to remain competitive," said Alexandra Tornow, Head of EMEA Logistics & Industrial Research at JLL. "In addition, over the medium term, we already see several other trends emerging that will increasingly impact on logistics real estate strategies, including 3D-printing and climate change."

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