AEW research : anche l’ industrial “ leggero” beneficia del forte momentum della logistica

AEW has published a new research report (summary below), authored by Hans Vrensen, Head of Research & Strategy, focusing specifically on the light industrial sector. With many investors focusing on large scale logistics warehouses, AEW examines in this report the fundamentals of the smaller scale light industrial and urban logistics markets.

After doubling its share of total retail sales between 2012 and 2019, Covid-19 further boosted e-commerce sales growth during the lockdowns. Consequently, more urban logistics is needed to deal with the growing number of parcels and to provide faster and more affordable services.

In addition, Europe is experiencing a 4th industrial revolution focusing on high value-add industrial production, triggering an increased need for modern and flexible light industrial space close to highly-skilled workers.

Scarcity of land together with strong demand should provide a solid driver for high land values and sustainable rental growth for some time to come for urban logistics and light industrial (re)-developments.

In response to the traditional scepticism on light industrial tenant quality, we have confirmed both the diversity and average credit score (BB) across a large sample of such tenants. This is in line with other property types and should not prove a hurdle.

Although lockdowns had some impact on industrial take up, the German, French and Dutch markets proved resilient after reaching a near-record 17.4 million sqm in 2019.

Unsurprisingly prime rents for light industrial are ahead of logistics as it comprises smaller buildings with a higher office component and located in more dense urban locations. In addition, rental growth for light industrial over the 2015-20 period has been broadly in line with strong growth in prime logistics rents.

Prime yields for light industrial across the German, French and Dutch markets have come down by 220bps over the last five years to reach 5.3% at mid-year 2020.

Surprisingly, prime light industrial returns across the three most established Western European markets are in line with prime logistics for both 2018 and 2019. Since 2017, light industrial returns have been ahead of both offices and retail. 

Source : Company