Our Europe panel
Hugues Braconnier Head of logistics, Allianz Real Estate
Thomas Karmann Head of logistics, AXA IM Alts
James Boadle Managing director, Oxford Properties
Philippe Van der Beken Head of Goodman, continental Europe, Goodman Real Estate
Ian Williamson Director and portfolio manager, BlackRock Real Estate
How did 2020 compare with pre-covid expectations for logistics in Europe?
IW: Covid-19 was the catalyst for long-standing structural trends accelerating at a rapid rate, and logistics was one of the main beneficiaries of this.
HB: Even though the world changed with covid-19, it also presented new opportunities as it accelerated market trends such as urbanization, domestic consumption, innovation and digitization. We strongly believe that prime assets in prime locations will always be in demand, and we continue to actively look at new logistics opportunities as the sector has proven its resilience.
TK: We saw very different market dynamics between countries, with wider spreads than expected. For example, France and the Netherlands saw a strong decline in occupier take-up, whereas the UK hit an all-time record with occupier take-up increasing by 60 percent when compared with 2019.
JB: Some of the cap rates now being achieved in the space have set new benchmarks ahead of expectations. But I think you can rationalize this, given the weight of capital seeking hard asset exposure.
What is the main lesson from 2020?
TK: That logistics is an essential support function to the economy and is very resilient to a crisis such as covid-19, as evidenced by the very high rent collection seen across Europe.
HB: A diversified, long-term-hold real estate portfolio with downside-protected income profile will be the key differentiating factor for investors.
PVdB: The importance of sustainability, technology and adaptability of the business to work remotely and flexibly.
IW: Investment discipline has been the main lesson from 2020, and it will continue to be so for the future.
Which logistics market will see the most interest in 2021?
HB: As a global investor in logistics, we remain interested in the key Europe, US and Asia-Pacific regions and will continue our diversified investment strategy within each.
TK: E-commerce and particularly last-mile delivery platforms will get increased investor interest this year.
JB: Logistics assets across the supply chain will remain equally important as consumerism and growth in e-commerce, as well as the creation of more robust supply chains, continue to be key drivers in the sector.
PVdB: We expect to see strong occupational demand across all markets.
What logistics issues keep you awake at night?
PVdB: The health and wellness of our people as well as doing what is necessary for a better world and a better planet. This is a serious issue and we are very focused on profound action on climate change.
IW: There are a lot of people who are not pricing risk correctly at present, and who do not really understand where their income is coming from; not all logistics is good, and there is a lot of underlying tenant pain to come as a result of the pandemic.
TK: A lot of new capital without sector knowledge coming onto the market, and price differences between core, core-plus and value-add getting tighter. Risk is no longer appropriately remunerated, which could pose a challenge going forward.
JB: A significant challenge is how we can achieve scale and continue to deliver accretive returns against our cost of capital in a sector that is increasingly competitive, and which I think still has some way to go. A key consideration for us is also the impact of the ever-shifting geopolitical environment.
What’s next for logistics?
HB: Logistics has always represented an area of focus as part of our diversification strategy. We expect the sector to remain resilient due to strong, persistent market fundamentals such as the continued expansion of e-commerce and consumer delivery demand, and supply chain rationalization.
IW: I expect the funnel effect will continue (too much capital being aimed at too few targets), with the inevitable result being frustrated demand which will drive increased speculative supply.
PVdB: Continued digitalization (for our customers and us) and making a positive contribution towards a more sustainable future.
TK: Looking ahead, the challenge will be on supply, with finding appropriate land becoming increasingly difficult. Rents will increase strongly on infill last-mile products, but weaker locations will struggle to provide underwritten returns in countries where demand is softening.