Newsletter Q1 UK 2018

Newsletter Q1 2018

Stages of maturity, logistics property investments

Logistics

Stage 3

Logistics viewed as infrastructure investments. Focus on financially strong tenants with strong track- record. Investors’ appetite for short lease agreements and value-add potential is mounting. More investors enter the market and liquidity increases. Increased development activity in terms of up-to-date and efficient logistics facilities.

Stage 2

Up-to-date and efficient logistics facilities let to strong- covenant tenants on long lease agreements offer attractive risk- adjusted returns. Institutional investors show interest in investing in logistics facilities offering cash-flow security. Liquidity increases and yields are driven down, always provided occupational market momentum exists.

Stage 1

Logistics facilities are acquired mainly for owner occupation. New construction and development driven exclusively by pre-existing lease agreements. Few buyers, low liquidity and high yields.

Source: Sadolin & Albæk

in Vejle, the latter two of which are part of the Triangle Region. Such clusters typically feature a predominance of properties that are sufficiently flexible to accommodate user demands and technological advances longer term. Such a measure of flexibility serves to future-proof the facilities, further reducing the vacancy risk associated with re-letting. Moreover, it sets new standards for the construction of prime-quality logistics facilities. For investors with the required risk tolerance and an appetite for higher returns such logistics facilities may prove to be interesting investment opportunities offering highly competitive risk-adjusted returns.

prevalence of owner-occupation with few investment transactions other than acquisitions for own use.

As the occupational market is picking up and employment levels are rising, and with advancing e-commerce and supply chain changes placing new demands on corporate storage capacity and distribution channels, the users of logistics facilities naturally start to search for up-to-date and efficient properties. Because of the mounting occupational demand, such properties are whetting investors’ appetite. Recently, the emergence of clusters has supported occupational market developments, for instance STC in Køge on Zealand as well as in Taulov at Frederica and Exxit59

FACT BOX

Serving as an indication of a shift in the Danish market for logistics properties to a higher maturity stage is the joint venture investment by domestic pension fund PFA and ADP in a 500,000 sqm site for the development of a new transport and distribution centre in Taulov near Fredericia. The centre is expected to be fully developed in the span of the next ten years. The investment shows a pension fund with a stronger appetite for risk, ready to assume development risk in the logistics sector and backed by a partner experienced in owning and operating logistics as well as infrastructure in the area. Precisely this type of transaction helps to mature the investment market.

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