The latest data from Jones Lang LaSalle indicates that investments in European logistics and industrial assets maintained its momentum in Q3 2012. In total 2.0 billion were transacted over the quarter, marking a slight dip from 2.2 billion in Q2. The marginal fall has been driven by a slow first quarter and the continued limited supply of prime product, meaning that year-to-date volumes were down 18% on the equivalent period in 2011.
"We continue to record strong investor interest in the logistics and industrial sector" comments Tom Waite, Associate Director European Capital Markets in Jones Lang LaSalle. "However, there remains a polarization in transactional activity across the region with the larger, core markets such as Germany, UK and France leading the way. Elsewhere, interest continues to increase in markets such as Poland, Benelux and the Nordics, while trading levels in key southern European countries remain subdued," Tom Waite adds.
The UK, Germany and France accounted for almost 80% of total investment volumes in Q3 2012, up from 71% in the previous quarter. Volumes in France and Germany were driven by a number of transactions, such as portfolio acquisitions by Segro and Blackstone in France and the new build 100,000 m² Amazon fulfillment centre in Koblenz (Germany) sold by developer Goodman to a US REIT.
Logistics and industrial assets traded over the first nine months of the year amounted to 1.3 billion in Germany and 810 million in France, up by 42% and 49% on the equivalent period in 2011 respectively. The UK still accounts for the highest transaction volume in the year-to-date, with 2.1 billion traded - a modest 6% decline if compared to the first three quarters last year.
Outside the core markets, Poland and Russia continued to attract strong interest and, driven by improving liquidity, they were the only two other markets that saw transaction volumes increase over the first three quarters, up 77% and 40% year-on-year respectively.
Nevertheless, overall the continued lack of prime product is expected to prevent a significant acceleration in transaction volumes during the final months of the year. As a result, full-year 2012 volumes are likely to remain around 20% below last year's figure of 9.9 billion.
"Continued high investor interest in combination with a shortage of prime product and an increasing selectivity is responsible for the current sideways movement of prime logistics yields which is expected to continue into next year as well" said Alexandra Tornow, Head of EMEA Logistics and Industrial Research at Jones Lang LaSalle.
"Still, market fundamentals for the European logistics sector continue to bode well, driven by a number of structural changes such as a change in the distribution network driven by growing internet sales and multi-channel retail or a shift in manufacturing locations that require a re-design in distribution networks. This will keep demand levels for modern facilities high and, consequently, support healthy investor activity. Therefore, we still see pockets of yield compression in selected markets over the coming quarters" she concludes.
The Jones Lang LaSalle weighted net initial European prime logistics yield index stabilized at 7.50% in Q3 2012, following a 10bps outward movement in the previous quarter.
Source: Jones Lang LaSalle