No reason to grumble
Press release including chart [PDF]
FRANKFURT, 5th July 2018 – It’s the inherent downside of an unusually strong performance on the investment market. At first glance, a comparison of a previous high with more recent data can come as something of a shock, especially when considering only the bare figures. Yet a second look reveals a very different picture.
Certainly, latest figures for the German investment market for logistics and industrial real estate have not been comfortable reading: in the first half of 2018, the transaction volume halved to €2.8 billion compared to the previous year (H1 2017: €5.56 billion). Here again, of course, the situation does not seem so bad when viewed through the lens of a logistics professional. This is because the experts expect this asset class to remain attractive to investors - a view that is confirmed by the statistics:
- An 18% increase in a five-year comparison.
- Logistics property continues to account for a double-digit share of the total commercial transaction volume. After reaching 15% in 2017, the share steadied at 11% after the first six months. The gap between logistics and the retail asset class (H1 share: 18%) has therefore narrowed considerably. The10-year average share for retail is 33%.
- The number of transactions is well above both the five-year and ten-year averages.
- Four transactions in the first six months ranged in the triple-digit millions - only one more took place in the same period of the previous year.
- Owing to the strong investment pressure, prime yields have fallen further still. The average prime yield decreased 15 basis points to 4.25%, and 4.0% could be reached by the end of the year.
Willi Weis, Head of Industrial Investment at JLL Germany, said: “The sticking point therefore is the size of transactions, primarily above the €100 million mark. While these amount to about €1.32 billion in the current year to date, and include the sale of the Alpha Industrial portfolio to Frasers in the first quarter and the Geneba portfolio transaction (German share) in the second quarter, the figures was three times as much by the same point in 2017. Thank goodness for Logicor and the Hansteen portfolio.” Apart from 2017, in no other first and second quarters has more capital been injected into the logistics sector than in the first six months of 2018. “No reason to grumble,” said the logistics expert.
The pipeline for the second half of the year is already well filled. A transaction volume of up to €6 billion is possible for 2018. “To lament over this would be like complaining about the lack of an exotic delicacy on a lunch table already groaning with food,” commented Willi Weis.
Light industrial or corporate real estate is becoming an increasingly important theme on the industrial investment market. At present, three portfolios that run into the hundreds of millions are generating considerable interest on the market, including the "Optimus Prime" portfolio of Beos, "Laetitia" of Aurelis and Starwood’s "M7". “Transactions for these portfolios will likely come to a successful conclusion in the coming months. Since the returns on these products are even more attractive than those for traditional logistics properties, and the portfolios are of a significant size, they are particularly attractive to foreign investors,” said Willi Weis. In the first six months alone, foreign investors increased their share of the transaction volume by 15 percentage points to 75% compared to the five-year average. This is clearly above average compared to the other commercial uses, where the proportion of foreign investors was only 48%.
While the supply of products with a core profile grows tighter, smaller portfolios of between €50 million-€100 million are being prepared for sale in the core+ segment and will be introduced to the market at short notice. Increased buyer interest is evident for small-volume single assets of between €5 million-€15 million, especially from domestic investors. "Returns in this range are more attractive and products are sufficiently available,” said Weis.