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Logistics should watch yields’ compression
03 July 2020 | Vanessa Sousa

The effects caused by the increase in demand for logistic units during the crisis should start to appear soon in Europe. One of those effects will be the yields’ compression.

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This projection is from James Chapman, International Partner and Capital Markets EMEA at Cushman & Wakefield, who explained during the webinar "What's Next: Logistics in Europe" that «there is currently a lot of capital being allocated to the logistics segment and, consequently, we will see yields compress, especially in core assets».

It should be noted that this projection is the opposite of the scenario drawn by the experts present during the webinar "Impact on real estate during the post-Covid-19", organised by the consultant at the beginning of June, who anticipated a yields’ expansion in the mid to long-term within the segments most affected by the crisis, such as hotels and retail.

The fact is that the logistic segment was one of the more resilient against the effects of the pandemic, which, according to Tim Crighton, Partner, Retail & Logistics EMEA at Cushman & Wakefield, can be explained by the «increase in e-commerce in the larger European cities, which had to increase and accelerate their supply chains».

This increase in demand boosted not only the occupancy market, but also the number of transactions, which first led to the conclusion of «small deals, but which will now start registering larger operations, such as has been happening in Germany», remarked James Chapman during the meeting that took place this Thursday morning.

The evidence registered within the Iberian market by Iberian Property confirms his version since during the second quarter the average ticket for logistic operations was 60% lower than the previous 12 months (16.3 million euro/deal). But according to James Chapman’s estimations, within a few months «there will be a price recovery» in Europe and Portugal and Spain will be no exceptions.

What does the future hold for logistics?

These market indicators promise «a very interesting period moving forward», filled with opportunities in several locations for logistics, highlighted Rob Hall, International Partner, Logistics & Industrial EMEA at Cushman & Wakefield.

If on the one hand «a boom for areas which are occupied due to the evolution of e-commerce» is expected, on the other hand, it is known that there will be more investment on technology, especially on the blockchain, and a greater concern with ESG - Environmental, Social, and Governance.

For Rob Hall, the ESG criteria «are on the frontline once again», given the growing concerns with the 2030 zero-carbon target, which includes reducing greenhouse gas emissions in 40% when compared to 1990, in Europe, according to the European Parliament. For Tim Crighton, however, there are other reasons which might be behind its increase in importance, especially concerning the level of confidence in terms of hygiene in the workplace, which became particularly relevant during the pandemic.

According to the Partner, Retail & Logistics EMEA at Cushman & Wakefield, the pandemic revealed the importance of logistics as a support to the supply chains and the need for retail to reinvent itself in order to work in tandem with logistics.

In the coming 18 months, opportunities may also appear in the capital market, by establishing strategic partnerships which seek to «improve interactions with the tenants so as to create a relation of trust», revealed James Chapman. «If we know how to take advantage of these trends, we may grab great opportunities in the future», he concluded.