Major user demand and shortage of land push up investor demand
The major demand on the occupier market, for both last mile logistics and larger-scale logistics, is still drawing increasing numbers of investors towards the logistics property market. Furthermore, the strong increase in e-commerce has only increased further the confidence in the future of the logistics market.
New entrants are therefore visible in the logistics market, though they mainly focus on the ‘core’ product, namely: newbuild and long-term let properties, and properties situated within an existing hotspot. In general, the considerable occupier demand and the entry of new investors onto this market are causing yields to shrink further. This is resulting in declining yields at these locations in particular. While the gross prime yield was still 5% five years ago, that is currently 3.5%.
Last mile logistics was also of major interest to investors, especially because interest from the occupier market is only growing, creating major confidence from investors.
The biggest investment transaction of 2021, for example, concerned the aforementioned Amsterdam Logistics Hub, purchased by CTP for a total volume of €307 million. This interest causes investors in logistics to increasingly invest outside of existing hotspots. After all, the hotspots are nearly saturated and last mile locations are often situated near to major cities rather than in existing hotspots. Thanks to the good fundamentals of this market, investors are also daring to invest more and more in large-scale logistics developments outside of the existing hotspots and in last mile locations.
Traditionally, the logistics property market is dominated by foreign investors. In the first half of 2021, as much as approx. 92% of the total investment volume originated from foreign investors. This is mainly because there are numerous foreign fund managers focussing on logistics property who have plenty of capital available and are willing to pay more competitive yields. It is therefore expected that in 2021, logistics property will be the biggest category for the first time in terms of investment volume. This may result in further yield compression.
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