Singapore’s sovereign wealth fund, GIC, has completed the largest European property deal of the year so far with the acquisition of warehouse developer, P3 Logistics Parks for 2.4 billion euros (US$2.7 billion).
P3 Logistics, based in the Czech Republic, is one of Europe’s largest fully integrated logistics platforms and developers” with 163 “high-quality” warehouses across nine countries on the continent.
Acquired from U.S.-based TPG Real Estate and its Canadian partner Ivanhoe Cambridge, the purchase is GIC’s first foray into the European logistics market following significant investment into platforms across Asia Pacific and the U.S.
Lee Kok Sun, chief investment officer at GIC Real Estate, said the purchase was based on the fund’s confidence in the long-term potential of the European logistics sector – a view that is being increasingly shared by overseas real estate investors seeking to capitalize on the rapidly changing sector.
JLL’s Head of Industrial in EMEA, Phil Marsden, explains that, for investors such as GIC, platforms like P3 offer immediate scale across the region coupled with access to an established developer, allowing for further growth.
“We see GIC’s entry into the European market as the first of potentially several such transactions in EMEA, with further activity expected in 2017,”
Blackstone, GLP, Ascendas and Prologis, are among a number of global investors who have recently increased their exposure to a sector that has traditionally enjoyed higher returns than its office and retail counterparts. Globally, vacancy levels of prime logistics assets are the lowest they have been in the current cycle – Asia Pacific sits at 5 percent, EMEA at 6 percent and the U.S. at 5.8 percent.
“Logistics and industrial property has become an increasingly popular asset class, as investors across the world are attracted to the sector’s high returns, sustained lower vacancies and increasing occupier demand,” says Michael Fenton, a member of property consultant JLL’s Global Industrial Board.
But it isn’t just the superior returns that are attracting new entrants to the sector, says Fenton.
“The logistics sector continues to benefit from technological advances, including Big Data, 3D printing, Robotics, Drones and, of course, the boom in e-commerce.”
Combined with ‘right shoring’ – the process of determining the proximity of sourced materials to production, warehousing and distribution in order to optimize margins – and the ongoing optimization of logistics in major urban areas, the sector continues to enjoy high occupier demand and rental growth.
“Due to their highly transparent and liquid markets, Australia and Japan are still the preferred destinations for global investors looking to capitalize on logistics assets within Asia Pacific. However, as the global hunt for yield intensifies, less mature markets such as India, China and Indonesia will benefit from a greater focus,” he explains.
“In the U.S., major markets continue to dominate investor focus, however a scarcity of major portfolio opportunities has seen investors focus on single asset transactions over the past 12 months. This is in contrast to the investment landscape in 2015 where major portfolio sales were prominent.”
Across Europe, 2014 and 2015 were record years for investment and occupier take up, with 2016 expected to deliver similar results. Over 30 percent of capital flows invested into the industrial sector in 2016 has been sourced from outside of Europe, over two thirds of which has been invested in the core markets of Germany, UK and France.
Marsden believes the sale of P3, and anticipated activity around other platforms such as Logicor, demonstrate continued and significant demand from global players looking for EMEA logistics opportunities with 2017 expected “to represent another year where demand will continue to outstrip supply.”