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Upswing in European Industrial investment activity in first half of 2010
October 13, 2010, 12:43 (PX Newswire)
Although recovery in both investment and occupational markets remains uneven according to Jones Lang LaSalle’s latest European Logistics report
Industrial investment activity saw an upswing in the first half of 2010 with an 80% growth in total direct European commercial investment compared to its market bottom level of 12 months ago. Despite this significant increase, volumes remained below pre-credit crisis levels with recovery in the industrial investment market still fragile and uneven according to Jones Lang LaSalle’s latest European Industrial Markets Autumn 2010 report.
European industrial investment volumes amounted to EUR 4.3 billion in the first half of 2010, with transaction activity 12% higher than the previous half year and an increase of 77% on the same period last year (H1 2009). Compared to volumes 12 months ago, the strongest growth was recorded in Sweden (+5.6 times), Germany (+2.7 times) and Russia (+2 times) while volumes have doubled in Norway. Belgium (-67%), Finland (-52%) and the Netherlands (-54%) were the only markets to see further weakening in investment volumes y-o-y.
Chris Staveley, Director of Jones Lang LaSalle’s EMEA Capital Markets team, said: “The UK has led the recovery in the European Investment market which in the first half of the year accounted for almost 40% of the total volume. Over the last 12 months however, investors have started to widen their focus and look to markets outside the UK; notably France, Germany, the Nordics and Poland. Despite this, 70% of industrial transactions were concentrated in only three markets in the first half of 2010; after the UK, Germany recorded the second highest volume (18%), followed by Sweden with 12%.”
The findings of Jones Lang LaSalle’s report show that the marked increase in investor appetite over the last 12 months for a relatively small pool of available top-end assets has driven down prime industrial yields across Europe. Jones Lang LaSalle’s net initial European prime distribution warehousing yield since reaching its trough level in Q2 2009 compressed 50bps and stood at 7.80% in Q2 2010, 20bps above the 10-year average. While yield compression in H2 2009 was entirely driven by a strong rebound in the UK markets, in H1 2010 a widespread inward yield shift across Continental Europe was witnessed. The overall European weighted net initial yield stabilised in Q2 and no significant further compression is anticipated in H2 2010.
Chris Staveley added: “The scarcity of prime product continues to hold up pricing at the top end of the market. Investors remain very interested in the sector however limited availability of prime industrial product on the market will subdue growth in investment volumes. We still expect to see further yield compression in the major markets throughout the remainder of the year however inward shifts will be less pronounced then the recent trend.”
In the occupational market demand for distribution property, which is highly correlated to economic growth, has continued to show signs of recovery since the second half of 2009. Total European warehousing take-up amounted to 5.8 million sq m in the first half of 2010 reflecting an 8% increase on the previous half year (H2 2009) and 22% on the same period last year (H1 2009).
Improved take-up volumes were boosted by strong rebounds in the UK (+170% y-o-y) and the CEE, where take-up volumes doubled on H1 2009 but were stable on H2. Take-up has grown moderately in Germany (+8%) and Italy (+11%) y-o-y. However, the overall recovery remains patchy and occupier activity continued to weaken in Belgium, France, the Netherlands and Spain when compared to H1 2009.
“Despite the still mixed picture in occupier activity, overall take-up volumes in the first half of 2010 have been marginally higher than the five-year average (+2%)”, said Alexandra Tornow, Head of EMEA Industrial & Logistics Research at Jones Lang LaSalle. “However, increasing tailwinds in the global and European economies together with the almost complete restocking of inventories will dent recovery in occupier markets and as such we anticipate that demand volumes will continue to level out with total take-up expected to be around 11 million sq m by the end of 2010, 8% higher than last year.”
Prime distribution warehousing headline rents remained stable in a growing number of markets over the first half of 2010 with rents in 20 remaining stable q-o-q in Quarter 2. Rents continued to fall in Barcelona (-3.2%), Düsseldorf (-3.7%) and Warsaw (-1.8%) and, surprisingly, headline rents increased in Prague in Q2 (+1.2% q-o-q and +6.2% y-o-y) and Manchester (+4.5% q-o-q while still down -1.7% y-o-y) due to stronger occupier demand and retreating supply. Nevertheless, the weighted Jones Lang LaSalle European Warehousing Rental Index recorded a further marginal quarterly decline (-0.3%) in Q2 and was down by -4.0% y-o-y.
Alexandra Tornow concluded: “While the annual rate of decline continues to decelerate, compared to the last peak (recorded in Q3 2008 in most markets), rental levels remain favourable for occupiers. This in turn could encourage sustained dynamic occupier activity in H2 2010 as tenants look to take advantage of conditions before the window of opportunity in most markets closes in 2011.”
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Notes to Editors:
• Jones Lang LaSalle’s latest European Industrial Markets- Autumn 2010 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 11 main European logistics markets: Belgium, Czech Republic, France, Germany, Hungary, 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.
• The Jones Lang LaSalle weighted average European prime logistics yield Includes Amsterdam, Antwerp, Barcelona, Berlin, Birmingham, Brussels, Dublin, Düsseldorf, Frankfurt, Glasgow, Hamburg, Leeds, London, Lyon, Madrid, Manchester, Milan, Munich, Paris, Rotterdam, Stockholm, Budapest, Prague, Warsaw and Moscow.
• Jones Lang LaSalle’s European Warehousing Rental Index is based on the weighted performance of 25 markets: Amsterdam, Antwerp, Barcelona, Berlin, Birmingham, Brussels, Budapest, Dublin, Düsseldorf, Frankfurt, Glasgow, Hamburg, Leeds, London, Lyon, Madrid, Manchester, Milan, Moscow, Munich, Paris, Prague, Rotterdam, Stockholm and Warsaw.
• Total European warehousing take-up includes Belgium, Czech Republic, France, Germany, Hungary, Italy, Netherlands, Poland, Russia, Spain and UK.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing 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 2009 global revenue of $2.5 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 149 million square meters worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with approximately $40 billion of assets under management.
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