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News Release

London, Moscow

Strong Growth in European Logistics and Industrial Investment in H1 2013

Highest half-year since 2007; sector on course for €10 billion in 2013


London, Moscow, 8 August, 2013 – European logistics and industrial assets remained firmly in favour with investors in Q2 2013. According to Jones Lang LaSalle direct investment for the quarter reached €2.8 billion, an increase of 17% in comparison with the equivalent period last year. Excluding the exceptional €1.2 billion portfolio deal of Prologis/Norges Bank in Q1, investment rose 40% over the quarter.

Highlights:
• Direct investment volumes reached €6.0 billion in H1 2013, a 57% increase on the equivalent period last year.
• Europe’s most active markets, the UK, France and Germany, accounted for over 60% of investment – but strong growth across a broader geography outside those core markets confirms increased investor interest in other countries.
• First European yield compression after three quarters of no change driven by inward movements in the UK, France, Germany and Russia.
• Full year 2013 investment in logistics and industrial assets is expected to exceed €10 billion.

Half year investment volumes, at €6.0 billion, marked a substantial 57% increase on H1 2012 and were 54% higher than the five year H1 average (H1 08 – H1 12). Meanwhile, logistics and industrial investment represented 10% of the overall commercial real estate investment in the first half of 2013 – up from an 8% average over the last five years (2008 - 2012), providing further evidence of the attractiveness of the sector.

“Over the last eighteen months, we have seen sustained growth in investor appetite for logistics and industrial investment opportunities thanks to healthy income returns. We are now seeing this interest starting to translate into meaningful increased transaction activity and investment volume. This is still driven by the current trend towards joint venture and platform deals, while direct transaction volumes is on the rise as well as investors continue to seek exposure to the sector” says Tom Waite, Director European Capital Markets in Jones Lang LaSalle. “Location remains fundamental but availability of prime product continues to be limited which, together with increasing demand, is putting prime yields under pressure in certain markets” he adds.

Europe’s most liquid markets – the UK, France and Germany – saw further growing investment in H1 year-on-year, up 21% on H1 2012. However, volumes were flat over the quarter as we are witnessing investors broadening their definition of core.

Investment increased more than four-fold in Benelux over the quarter whilst it was up also almost four fold across the Nordic Countries, with Norway making the strongest contribution. In Poland volumes were more than three-fold albeit they were still contained. Still no significant investment activity was recorded in Southern Europe despite renewed interest particularly in Spanish assets.
The investor base is becoming increasingly diversified and capital sourced outside Europe or globally continued to rise over the quarter, up 40%. Over the first half year it amounted to over €1 billion, up 37% on the equivalent period last year and 21% higher than the five year H1 average (H1 09 – H1 12). Investors sourcing capital outside Europe or globally continue to target prime assets in core markets and in the first half of 2013 have invested mainly in the UK, France and Germany.

“The weight of capital targeting European logistics and industrial assets remains significant albeit transaction activity remains constrained by a lack of prime opportunities. This has upheld pressure on pricing and in Q2 led to the first European yield compression after three consecutive quarters of no change. However, there is now gradually more investible stock coming onto the market as continued healthy occupier demand is leading to new development. As a result, we now expect full year 2013 investment to break the €10 billion barrier – which would be the third strongest  result ever recorded” comments Alexandra Tornow, Associate Director EMEA Logistics & Industrial Research in Jones Lang LaSalle.

Tom Devonshire-Griffin, Regional Director, Head of Capital Markets, Jones Lang LaSalle, Russia & CIS, comments: “Moscow logistics is moving up on investors priority lists. Consumer spending is a key driver of Russia’s economic growth, leading to a continued retail boom, with the corresponding need for storage and distribution follow suit. Moscow is both Russia’s primary logistics hub and fundamentally undersupplied, with only 9 million sq m of quality space, (0.6 sq m per capita vs. 4.8 sq m in Paris). While regional markets, like St. Petersburg, Novosibirsk, and Kazan have growing logistics markets, the demand placed on Moscow is paramount: the share of Moscow Region stock accounts for 60%, while its population is only 13% of Russia.”

“As a result we saw record low vacancy rates in Moscow, at 0.57% in Q2 2013. We recorded 25 bps compression of Moscow industrial yield in Q2 2013, to 11%. We believe this trend will continue especially with capital values so close to construction costs. Also, initial logistics yield allows over 400 bps premium over current low cost of finance (at most 7% all in cost, which is similar across all sectors despite the 250 bps difference in valuation). With this background we expect the industrial investment volume in Russia to increase from 5.7% in 2012-H1 2013 to a level recorded in Europe in H1 2013 of 10% of total investments into commercial real estate,” – says Tom Devonshire-Griffin.

Prime logistics yields have compressed in a number of markets, including Birmingham (-25bps), London (-25bsp) and Moscow (-25bps) as well as across several French and Germany markets at a softer rate of 10bps in most locations, 20bps in Munich and 5bps in Lyon. Consequently, the European logistics yield moved in by 10bps in Q2 2013.

European Logistics and Industrial Investment Volumes

Dynamics of Investmment to Warehouse and Industrial real estate_080813.png
Source: Jones Lang LaSalle

Notes to Editors:
Our investment market analysis is based on the whole European region and includes transactions >EUR 3.5 million (US $5million).

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 242 million square meters and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Aktau. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.
For further information, please visit www.jll.ru