JLL: Logistics and semi-industrial market - a mixed year with improving outlook (BE)

Jones Lang LaSalle's analysis of the logistics and semi-industrial markets in Belgium for 2010, reveals substantial differences between the different segments within the sector, and highlights the different geographical zones.

Contrasting segments
Commenting on 2010 and the prospects for 2011, Jones Lang LaSalle Head of Industrial and Retail Leasing Walter Goossens pointed firstly to the fact that the excellent performance in the semi-industrial sector was largely due to activity from small and medium companies. And where these companies often vacated larger premises to move into smaller ones, other companies in the area were able to take up the vacated space and keep the market moving. With the relatively positive economic data coming out of Belgium, 2011 is likely to be as good as 2010 in this sector, he added.

The situation in the logistics market in 2010 was the exact opposite; however, with take up only a quarter of what it had been in the 2005-2008 period. In geographical terms, more than half of all logistics take-up in 2010 took place on the Brussels-Antwerp axis (E19/A12). Looking forwards, there are a number of large demands on the market, with tenders for space of between 45,000 m² and 65,000 m², and if some of these come to fruition in 2011, the disastrous take-up figure of last year could be doubled. The overall market has been affected by the economic crisis. Activity for the 3PL declined and the existing low demand could be satisfied in the vacant space in existing portfolio of the logistic players. The situation for 2011 is likely to be that logistics providers will have to go to the market for new space, as vacancy in existing buildings will be limited. The Belgian market as a whole reacted more slowly than surrounding markets to the crisis.

Rental levels in the semi-industrial market have remained relatively stable for a number of years. They have nevertheless been corrected downward in Q2 for the prime region Brussels – Flemish Brabant, coming from €60/m²/year to €55/m²/year.

In the logistics market, although vacancy remains low, the decline in demand and in take-up has pushed the rental levels downwards through the year. Coming from €60/m²/year end 2009, it has progressively decreased to reach €50/m²/year in Q4 2010 for the prime axis Brussels-Antwerp. Moreover, there is more 'incentive' activity than three or four years ago, with rent-free periods now more attractive for tenants.

Another throw-back from the economic crisis is the scarcity of new logistic product, with developers having frozen their activities in the 2008-2009 period. This has led to a situation where only one major speculative logistics project – Canal Logistics phase II – 22,000 m² – is due to come onto the market this year. The logistics construction which is taking place is mostly for own-use – such as H&M in Ghlin-Baudour– and will not impact the market in terms of vacancy.

Attractive location
"Belgium remains a much appreciated logistics location for a number of reasons", Walter Goossens explains.

"Firstly, it is centrally located in the 'logistics banana' running from the North Sea to Barcelona, and then we have excellent infrastructures, a specialised and well-trained workforce, and major ports such as Antwerp, Zeebrugge and Ghent. Figures from these ports already show an increase in traffic and this can only be to the advantage of the logistics sector."

Investment in logistics real estate remains a prime target area for European investors, and the weak performance of last year was more due to lack of new product than any other reason. There remains substantial demand for core logistics product from investors, who have money to spend once the product appears. Prime yield hardened in this sector over the year by 75 basis points and currently stands at around 7%, but if more Grade A product becomes available, this could shrink to a slightly lower level.

Decline in demand in the warehousing market during the crisis did

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