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Savills: Demand for logistics space soars

30 June 2020

According to Savills, demand for logistics property has soared as a result of increased levels in eCommerce.

Savills has also noted the average spread between prime industrial and prime shopping centre yields across mainland Europe has converged for the first time.
This rapid convergence has also been the result of a gradual softening of shopping centre yields over the past two years.

Marcus de Minckwitz, director in the Regional Investment Advisory Team, EMEA, said: “This convergence of prime industrial (mainly logistics) and retail (shopping centre) yields reflects the shift of investor interest into logistics properties and away from physical retail, along with the rise of eCommerce and the growing demand for warehousing space by 3PL providers and retailers. This trend is one that has been exacerbated in recent months with the arrival of Covid-19 across Europe which has meant more consumers than ever have been shopping online; not only out of choice, but also out of necessity.

“Although the end of Q1 has been quieter year-on-year from an investment perspective and, we predict, as has Q2, we expect a strong recovery of the industrial sector driven by logistics transactions. As a result, and with retail being disproportionately hit by the pandemic, the spread between yields for logistics and shopping centres could increase further throughout 2020.”

Eri Mitsostergiou, research analyst, European Research Division, Savills, added: “Given the scale of investor demand and low vacancy rates, the prospects for logistics are the most positive, with 79% of our markets expecting an increase in transaction volumes in the second half of 2020. This is a trend expected to be sustained into 2021 and 2022. Logistics capital values are anticipated to increase accordingly, with 47% of markets predicting increases from H2 2020.

“The pandemic could force many companies to reassess their regional supply chains and near shoring, potentially creating new manufacturing hubs, boosting further the overall industrial investment volumes.”