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News Release

London - Moscow

European industrial investment volumes in H1 2009 down 50% year-on-year; although activity is now improving

Occupier markets remain constrained by weak economic fundamentals according Jones Lang LaSalle’s latest European Logistics Report

London - Moscow, 13 October 2009 – Total direct industrial real estate investment volumes amounted to € 2.2 billion in the first half of 2009 reflecting a 45% fall on H2 2008 and a 50% fall on H1 2008 according to Jones Lang LaSalle’s latest European Industrial Markets Autumn 2009 report. 

Chris Staveley, Head of the Pan European Capital Markets team at Jones Lang LaSalle, said: “Although overall investment activity remained subdued in the first half of the year, in the second quarter investment volumes stabilised with a pick up in investor sentiment significantly more positive than transaction volumes would suggest.  Whilst a full recovery will depend on debt markets, and occupational markets, which look set to remain weak for some time to come, we anticipate transaction volumes to carry on improving with investor interest focussed on a narrow band of prime assets in core markets.”

Largely due to a strong price correction since the end of 2007, the UK industrial market saw its market share grow significantly, accounting for half of the total European volume invested in industrial assets in H1 2009.  The core Western European markets, on the other hand, recorded only € 750 million of transaction volume, reflecting a fall of 61% on H1 2008 and by 40% on H2 2008. The sharpest drop in investor activity was in Germany where it was down by 80% on H1 08 and by 86% on H2 08.

The findings of Jones Lang LaSalle’s report also suggest that industrial yields appear to be on the verge of stabilisation. In Q2 2009 the Jones Lang LaSalle weighted average European prime logistics yield  stood at 8.00%. Following outward shifts of 60bps in Q4 2008 and 40bps in Q1 2009, with a further 30bps outward movement continued to ease in Q2 2009.

Chris Staveley added: “The UK has been the first market to record a hardening of yields as competition has increased for prime assets. A number of markets, mainly the core Western European ones, are now starting to fall in line with their long term average yield level whilst other markets continue to record yield levels that are lower than their long term average. However, many of these, in particular the Central & Eastern and Southern European markets, have been through a maturing process in recent years and, as a result, are expected to see yields stabilise below their long term average.”

Total occupier take-up in the main European distribution warehousing markets covered in Jones Lang LaSalle’s analysis amounted to 4.7 million m² in H1 2009. Compared to the previous half year (H2 2008) take-up declined by 28% and was 36% lower than in H1 2008.

Given the reduction in occupier demand and difficult credit conditions, development activity has declined significantly over the last 12 months.  Nevertheless, according to Jones Lang LaSalle’s findings in H1 2009 new completions in Europe amounted to 3.6 million m², only 25% less than in the first half of last year. Compared to existing stock, new completions remained particularly strong in Poland and the Czech Republic, driven by schemes initiated in 2008.
Alexandra Tornow, head of EMEA Industrial & Logistics Research at Jones Lang LaSalle, commented: “Whilst credit conditions are starting to ease, industrial development continues to be hampered by financial constraints and with demand levels expected to remain limited for at least the next 12 to 18 months, which will significantly limit the number of new construction starts.”

Alexandra concluded: “However, we expect favourable occupier conditions to sustain a more dynamic occupier demand in 2010 as many companies will be keen to secure space which they previously ruled out as too expansive. Furthermore, with increasing signs of improving GDP growth prospects and forecasts predicting stronger GDP growth in 2011, which will lead to an increase in international trade volumes, existing vacancy in prime markets could be absorbed quickly. As it will take some time for industrial developers to react to growing demand, limited development activity might therefore lead to a short-term supply shortage in 2011.”
• Jones Lang LaSalle’s latest European Industrial Markets- Autumn 2009 report looks at the drivers and future trends influencing the European distribution warehousing real estate market. In our analysis we include warehouses for storage, distribution centres, cross-docking warehouses, sorting and cleaning centres and cold storage warehouses.

• Our market data covers the 12 main European logistics markets: Belgium, Czech Republic, France, Germany, Hungary, Ireland, Italy, Netherlands, Poland, Russia (take-up: Moscow only), Spain and the UK. Our analysis is based on units > 5,000 m² for Continental Europe and > 10,000 m² for the UK.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specialising in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.3 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $36 billion of assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Almaty. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008 and 2009 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.
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