Investment In European Industrial Property Returns To Pre-Crisis Levels

http://www.ft.com/cms/s/0/b98e961e-feac-11e2-b9b0-00144feabdc0.html#ixzz2bHs44RGa August 6, 2013 Investment in European industrial property returns to pre-crisis levels By Ed Hammond, Property Correspondent Spending on European industrial property has returned to pre-financial crisis levels as a range of international investors vie for warehouses, logistics hubs and small factories, underscoring the improving sentiment over the continent’s economy. Investment in the sector, driven by pension funds, private equity investors and sovereign wealth funds, hit €6bn during the first six months of the year – 60 per cent up on last year and the highest level since 2007 – according to new data from Jones Lang LaSalle, the property consultancy. The sudden surge in demand for the esoteric asset class, among the worst hit in Europe’s property crash, suggests a revival in investor confidence over the prospects for the retailers and consumer goods businesses that dominate the leaseholder registers of industrial landlords. In the first years of the financial crisis, vacancy rates soared as companies cut back on their surplus stock, and small manufacturing businesses, which also account for a lot of warehouse space, were closed or mothballed. Tom Waite, director of European capital markets at JLL, said the demand for industrial property had been rising steadily for the past 18 months. He added, however, that a lack of new, well-located stock had stifled the ambitions of some investors. “There is now gradually more investible stock coming on to the market as continued occupier demand is leading to new development. As a result, we now expect full year 2013 investment to break the €10bn barrier – which would be the third-strongest result ever recorded,” he added. The investment this year has been centred on the continent’s largest property markets – France, Germany and the UK – which accounted for 60 per cent of all transaction value. The largest deal of the period involved a €1.2bn portfolio acquisition by the joint venture of property group ProLogis and Norway’s oil wealth fund. The sector has also proved particularly popular with private equity funds, which have started to look beyond the Europe’s now highly competitive office and shopping mall markets. Blackstone, the US private equity firm, has been among the most active investors in the industrial sub-sector, creating a specialist logistics and warehouse property business. One of the main attractions of industrial property, which represented 10 per cent of Europe’s total real estate investment market during the six months, is that yields on warehouses are typically much higher than those available on prime offices or retail property. Taylor Scott International