According to the Forcadell’s new Industrial-logistic market report, the surge of e-commerce has implemented structural changes in short to mid-term in the logistic sector, especially when it comes to the distribution model.
The dynamism of the economy and the introduction of new technologies in the industry have led to a qualitative leap in the industrial sector, a fact that is reflected in the specialised level that the client of industrial warehouses is acquiring.
Forcadell’s research highlights that industrial warehouse demand has been very favourable throughout the 2017 financial year, due to the positive momentum of the Catalan industrial sector and the scenario of economic growth. In the second semester of 2017, prices as well as warehouses for sale and rent have maintained the upward trend in almost all the zones.
INDUSTRIAL WAREHOUSES FOR RENT
DEMAND
According to Forcadell’s research, Rental demand proved cautious during the last stage of 2017, standing at a -8, 8% year-on-year decrease. In any case, taking into account the boom of requests registered in the first half of the year, in annual terms the rental demand has been very favourable throughout 2017 due to the good performance of the Catalan industrial sector and the economic growth scenario in Spain.
The current momentum of the economy and the implementation of new technologies represent a qualitative leap in the industrial sector. The main demand requests consist of newly constituted companies which basically require smaller warehouses and of already established companies looking to expand their current facilities. It is worth highlighting the requirements the clients of rental warehouses are currently demanding. They prioritize better conditions of the property, optimal finishes and up-to-date regulations of the premises, while putting off cost reduction. Demands of warehouses up to 500 sqm, characteristic of the Catalan industrial network, involved 42% of the requests of the market in the second semester. Followed by spaces of 500 to 1000 sqm, focusing 27% of the registered demand.
Analyzed by zones, the regions with the most demands are, besides Barcelonès, continue being the ones neighbouring the area: Baix Llobregat, Vallès Occidental and Vallès Oriental.Among them they represent 94% all of the demand.
SUPPLY
The scarcity of available quality space in the main urban cores of the 1st Crown is an evidence the industrial real estate market has been dragging since 2015. Supply for industrial warehouses to rent in Barcelona keeps dwindling: companies search for locations and only some of them have been able to grab the available spaces that are close to the Catalan capital. Consequently, the existing supply consists basically of warehouses of a certain age or outdated, which do not respond to the whole range of the demand.
Supply in H2 has been distributed in similar proportions as usual. The regions closer to the Catalan capital are the ones offering a greater availability of warehouses. Currently the volume of demand is high enough to promote speculative developments in the industrial sector.
PRICES
The new Forcadell Market Report points out that rents for industrial warehouses in Catalonia have maintained the rising trend in H2 2017 in almost all areas, registering inter-annual increases of 11% to 16%, with the exception of Garraf and Camp de Tarragona, which registered higher increases. Prices for warehouses for sale were also higher in H2 2017. The Barcelonès is the region registering the highest growth, with a 13, 39% year-on-year increase. As seen in the graphic of rent evolution, the tendency of the market is towards gradual increase since 2013, pushing prices higher this past year.
By zones, Barcelonès is the region that has registered the highest rents, with an average price of €4, 47/month/sqm, followed by the neighbouring regions: Baix Llobregat, Maresme and Vallès Occidental.
The evolution of prices for 2018 suggests that the growth trend will continue due to lack of space and rising demand, although with less variations as the ones registered for 2017.
INDUSTRIAL WAREHOUSES FOR SALE
DEMAND
In H2 2017, demand of industrial warehouses to sale registered a 7,58% year-on-year increase. This rise in demand, which has been constant for the past year and a half, reveals investors as well as end consumers share a strong willingness to buy, backed by the stable growth of the sector and the strong increase in manufacturing. Along this second half of the year, warehouse demand has shown to be more cautious, a fact that has slowed down but not cancelled transactions.
Regarding distribution of the demand by surface, the Forcadell Industrial-Logistic market report highlights the requests for warehouses for sale of 500 to 1.000 sqm have grown to double: there has been a 90% increase respect to H2 2016. However, these do not lead the ranking of demand by surface: the most requested by the Catalan industrial network are those of up to 500 sqm, gathering up to 42% of demand in H2 2017.
Addressing to distribution of demand by zones, buying interest is sustained in the Barcelonès and neighbouring regions.
SUPPLY
The volume of warehouses for sale keeps shrinking due to the lack of spaces, and to the fact that few sqm are not being introduced into the market. To this scenario of shortage of space, many owners of industrial warehouses have opted to rent instead of selling in order to obtain yields while holding on to their industrial assets. On the other hand, companies that are already in the market and buy a new warehouse to expand and move their facilities put the current warehouse to sale or rent, which does not have any impact on the introduction of sqm.
Regarding geographical distribution, availability of warehouses for sale in H2 2017 has focused in the regions of the Barcelonès, Baix Llobregat, Vallès Oriental and Vallès Occidental.
PRICES
Industrial warehouses sales’ prices continue their upward trend. In H2 2017, sale prices experienced a 10, 2% year-on-year increase, similar to the figure registered the past 6 months and considerably higher to the past 2 years. The Barcelonès, with a 13, 3% year-on year increase, is also the region which maintains the highest sale prices. Baix Llobregat, Vallès Occidental, Vallès Oriental and Maresme are the following regions, evidencing a greater imbalance between supply and demand. Experts forecast prices will continue to rise throughout 2018 due to the lack of space.
Over the course of H2 2017, maximum sale prices have registered a higher increase. This is due to a reappraisal that modern warehouses have experienced, with high-tech facilities. Owners of these warehouses request a higher sale price than the average of the market.
INDUSTRIAL LANDS
The Forcadell market report highlights that while availability for industrial plots is still scarce in locations next to the Barcelonès region, promoters and end consumers continue to fuel the growing demand. Currently the logistic sector is the main player when it comes to land promotion projects. Promoters’ interest focuses mainly in logistic warehouses projects, with spaces between 3.000-50.000 sqm destined largely to rent. Most part of transactions are being carried out previously or during the construction process of the warehouse, a fact that facilitates a greater adaptability of the project to the needs of the tenant.
Following the same upward trend of the past six months, the prices of industrial lands have continued to grow in H2 2017. According to regions, the Vallès Oriental and the Vallès Occidental have registered the highest year-on-year increases for the second consecutive semester: 16,5% and 14% respectively. The inter-annual increase registered in the region of Barcelona at the closing of the fiscal year 2017 is of 10,2%, 2 points higher than the increase registered for H1 2017. The Barcelonès, Baix Llobregat and Maresme are the regions than register the highest prices in Catalonia. The forecast throughout 2018 is for the growth trend to continue, although moderately.
INVESTMENT MARKET
As noted in the H2 2017 market report, the evolution of the logistics real estate sector has been very favorable these last 3 years, sparking the interest of Core Investment Companies, REITs and international funds. At the closing of the 2017 financial year, investment in the logistic sector exceeded €1.500m, a 95% increase respect 2016 (€785m), detecting throughout 2017 an increased involvement of international funds in like Segro or European Logistics (ELOF). Forecasts for 2018 are increasingly optimistic since it is expected that take-up volume will be as favorable considering the excellent performance of the sector. The significant take-up figures and lack of space are boosting land promotion. Currently, promotion projects are being directed mainly to the construction of logistics warehouses to be destined to rent, with spaces between 3.000 sqm and 10.000 sqm by local Core Investment Companies and 50.000 sqm by investment funds and REITs.
The logistics real estate sector is still offering the highest yields from a Core investment perspective, despite having the lowest rents by sqm. This tendency, which is also consolidating in Europe, is based in the low return of the initial equity, compared to other real estate assets. In the 1st Crown, yield compression has continued and is placed between 6-9%, while in the 2nd (7-10%) and the 3rd (8-10%) slight raises are still discernible. Financial entities, on their behalf, are open to provide loans to financially sound clients. Among the most outstanding operations of H2 2017 is the acquisition of Mango’s logistic warehouse and head office by Invesco (€114m), through a sale & leaseback transaction. Blackstone also used this option for the acquisition of 4 logistic warehouses (€90m) of the DIA group, which will continue in the logistic centers as a tenant.
INDUSTRIAL-LOGISTIC MARKET
The logistic sector has followed a very favorable evolution these past 3 years. Logistic take-up volume built up to 459.491 sqm in 2017, a figure which implies a 34% drop respect 2016, but it shouldn’t be considered as a slowdown of the real estate logistic activity, since in the previous year Mango and Amazon had an exceptional impact in the annual balance. The 2nd Crown has led the last 6 months of the year, gathering 44% of the sqm and 48% of the transactions made. Therefore, 2017 is within the framework of take-up volume and activity level of 2015 and 2016, well above the years before the real estate crisis. The boom of e-commerce requires that companies have logistic infrastructure near the urban cores. However, since it is almost impossible to find spaces between 5.000 sqm and 10.000 sqm in the vicinity of Barcelona, take-up has not reached the volume of the past 2 years. In addition to large logistic platforms, e-commerce establishes mid-term structural changes for the Logistics real estate sector, especially regarding the distribution model: in the coming years plenty of urban distribution centers are expected to emerge. This scenario poses new challenges: finding new spaces in the urban cores from where to optimize the distribution process, in order to find spaces in these urban cores or the immediate vicinity of cities from where to optimize the distribution process, as collection centers that can accommodate working through synergies with with other sectors (like Amazon has done with food chains).
Regarding surfaces, the most relevant transaction has been Alfil Logistics, that has rented 35.000 sqm in El Prat de LLobregat (1st Crown). Regarding location, highlight the transactions of Amazon and Alfil Logistics in Zona Franca, of 9.300 sqm and 10.000 sqm respectively. Among the transactions Forcadell has brokered, the renting of a logistic warehouse by AB Custom of 4.182 sqm in Parets del Vallès and the purchase by Depotrans of a land site of 7.875 sqm in Barberà del Vallès to build a custom- made warehouse.
Previous