EGi: CBRE: European industrial investment set to rise

15 October 2009

Investment turnover in Europe’s industrial and logistics real estate sector could be set to rise after €2.5bn of deals were completed in the first half of 2009. CB Richard Ellis’ latest EMEA Industrial & Logistics MarketView report reveals the sector maintained its 10% share of the wider investment market, amid evidence of stabilising yields and increasing liquidity in the sector.

Richard Holberton, director of EMEA research at CBRE, said: "Assuming that investment levels are maintained in the second half of 2009, there is scope for absolute levels of investment in the industrial sector to rise in 2010. The defensive characteristic of a high-income return, and hence less dependence on income growth, is one factor that enhances attraction to investors in weak economic conditions."

The report showed the rise in industrial and logistics yields across Europe slowed to 10 basis points in the second quarter of 2009, amid evidence of stabilising yields emerged across all sectors as investment turnover picked up. The resulting increased stability reflects a narrowing gap between vendors’ and purchasers’ pricing aspirations, which should boost liquidity in the sector, it said.

James Markby, associate director of EMEA cross-border industrial and logistics, said: "The core Western European markets of the UK, France, Germany and the Netherlands have emerged as the most resilient in terms of demand and investment appetite, accounting for more than 70% of the industrial investment market collectively. "A range of pan-European institutional investors, as well as a number of German open-ended funds, are now increasingly attuned to the advantages of investing in the sector."

Rents in core European industrial markets have so far held firm despite general regional downward pressure, with the EU-15 industrial rent index 5.4% lower in the year to mid-2009 - a contraction that has eased slightly in Q3 to around 4.5%. On the occupier side, the need to control costs to protect margins and a desire to maximise the efficiency of occupied space continue to be key concerns for occupiers.

According to CBRE’s research, demand is currently mainly focused on modern, flexible industrial and logistics space across Europe. The short-term rental outlook remains subdued, but will improve as supply growth slows due to the lack of new development starts. Guy Frampton, executive director of EMEA cross border industrial and logistics, said: "The range of corporate decisions around space utilisation and supply chain reconfiguration will create pockets of stronger demand for modern, flexible space. As a result, where funding is available, build-to-suits are emerging as an area of opportunity, partly because occupiers are often prepared to take longer leases and fewer incentives in these situations."

Source EGI - Patrick Clift 15/10/2009 16:02