From the perspective of the capital markets, the European logistics market is seen as the winner of the pandemic in the medium to long term: the unstoppable "booming e-commerce", intensified by the side effects of an ever-increasing nationwide spread of working from home at the end customer level, but also as a result of the dramatic upheavals among department store providers in Europe, make this mixture a positive situation to investors. In operational terms, the first measurable effects of production relocation are now being felt, and with them a change in location within the European conurbations. All in all, the sector’s resilience and importance make "logistics" a strategic must-have investment at present.
The still existing excess returns compared to other asset classes and the constant shortage of space continue to drive investor demand. This metamorphosis away from the niche segment to a sustainable investment class is continuing almost exponentially. This is also reflected in our new market analysis: strong price dynamics accompanied by further declining yields in the majority of the 107 European logistics regions.
The yield compression continues incessantly:
- Currently the European average yield is 5.41%, ranging from Berlin (3.7%) to Tartu (8.5%).
- The current European top rent averages €5.62/sqm while the respective willingness to pay for one square meter of logistics use ranges from Lodz (€3.40/sqm) to London (€16.50/sqm).
- In the top regions of Germany, the prime yields for logistics properties have now fallen well below the 4% mark.
- Many Mediterranean cities are also showing significant discounts; Marseille is even showing a drop in yields of 125 basis points to 4%.
- Rising prices can also be observed across the board in Poland and the Czech Republic.
- We continue to find the highest yield values in the three Baltic countries with prime yields of 7.25%.
- The Nordic markets still appear relatively cheap compared with their European counterparts, with Copenhagen (5.0%), Helsinki (5.2%) and Stockholm (4.6%) in particular experiencing further yield compression.
- Price levels are more or less stable only in the UK, Italy and Poland. The logistics region of London continues to generate by far the highest rents, with the yield remaining unchanged at 4%.
A review of the European logistics map illustrates the country-specific consequences of the pandemic and the overarching run on logistics properties. Although Europe continues to grow together in functional and geographical terms via the various transport and traffic corridors, specific functional clusters can still be identified in each country, which continue to represent a large offer for investors with different risk profiles.