Real Asset Insight #6 June 2020

‘Capital will be reallocated
to logistics post-crisis’
Experts agree demand will rise as sector’s importance grows
‘When the dust
settles, there will
be a substantial
redirection of
capital towards
our asset class.’
Robert Dobrzycki,
Panattoni Europe
The strength and importance of the logistics
sector will emerge reinforced from the
Covid-19 crisis, most experts believe.
‘Our view is that logistics is the most resistant
asset class,’ says Robert Dobrzycki, CEO of
Panattoni Europe. ‘Next year, when the dust
settles, there will be a substantial redirection of
capital towards our asset class, which will be very
positive for the sector. Banks feel the same way.’
Many feel they are underinvested and will seek
to deploy more capital in logistics, as the
sector’s resilience and importance has been
highlighted by the coronavirus pandemic and
the shift to online shopping.
‘There will be a lot of demand for logistics when
this is over,’ agrees Stephan Riechers, head of
investment management logistics at Union
Investment Real Estate. ‘Institutions will seek to
reallocate capital into logistics and away from
other sectors like hotels or retail.’
Investors from all over the world are already
dipping their toe in the water, even if the
recovery is not in sight yet. ‘Fundraisers in
logistics are doing a great job, we see interest
from the likes of Blackstone and others in the
US but also from Asia. There is a strong belief in
logistics as an asset class,’ says Ingo Steves,
managing director of Gazeley North Europe.
TEMPORARY VALUATION DIP
The current climate of uncertainty and low
liquidity is pushing valuations down, but it is a
temporary situation and prices will rise again as
soon as there is some light at the end of the
tunnel, experts agree.
‘Equity buyers are being pickier, debt is more
expensive and the investor pool is smaller now,
but when the rebound comes it could take us
even beyond pre-Covid-19 levels,’ says Marcus
de Minckwitz, director, omnichannel group, at
Savills.
‘The fundamental strength of the asset class
might not be recognised yet, but next year
pricing will return to pre-coronavirus levels,’
adds Dobrzycki. ‘My advice would be don’t sell
now unless you really have to.’
Online growth fuels interest in spec development
Lower costs and the anticipation of
higher demand make this a good time
for speculative development, some
experts believe.
‘Spec development is something we are
doing because we strongly believe in it,’
says Ingo Steves, managing director of
Gazeley North Europe. ‘It is a great time
for logistics because everyone is ordering
online. Buildings under construction that
will be completed in Q4 are already leased.’
Demand is one driver, as well as lower
construction costs and subdued activity
during the crisis. ‘Given what is happening
to construction prices, we would be
selectively pushing for spec development
in some markets,’ adds Robert Dobrzycki,
CEO of Panattoni Europe.
‘It is not a bad bet: if you believe logistics
is the right asset class you can build now
at lower costs in the right location and
then you are ready for when the market
picks up,’ he says. ‘It could be the best
deal you are likely to do for several years.’
ONLINE GROWTH
The growth in online shopping, which
is fuelling the interest in logistics, is a
trend that has been accelerated, but not
created, by the crisis and it will continue
once the pandemic is over.
‘E-commerce is the winner in this
situation, if the term can be used in such
an emergency,’ says Dobrzycki. ‘The shift
to online is a short-term response to the
crisis but it is also a long-term trend. It was
clear before, it is even more obvious now
that it’s growing faster than ever.’
An indication is the recent announcement
by Amazon, the undisputed market leader,
that it is seeking to hire an additional
75,000 workers on top of the 100,000 it
has recently recruited.
Retail sales are forecast to grow by 2.5% a
year between 2019 and 2024, according
to Savills figures, while online penetration
is predicted to grow at an average of 8.5%
a year in the same period.
28 Real Asset Insight | Issue 2 July 2020