The performance of the logistics sector slowed down during 2001 compared to the more positive performance of 2000. Gross returns decreased from 19.3% in 2000 to the current 8.7% for Western Europe. A result, however, positive when compared with the gross returns of the office sector (4.2%) and the retail sector (8.6%).
Maximum rents remained stable in most of the reference cities. The rent index, although marking an increase of 0.6% (2001), was the lowest growth rate since 1996.
The absorption rate remained below the 2000 level, although remaining high. Demand was sustained, supported by a general phenomenon of consolidation, rationalization and a realignment of the distribution network. Markets such as the Netherlands and Spain have seen substantially high levels of absorption.
The high demand generated by users in 2001 generated an increase in construction activity. However, absorption remained below forecasts resulting in increased supply in some markets.
Investors have shown strong interest in the logistics sector, although category investment has declined due to the slowing economy and a generally more cautious attitude. In some markets, investment activity was also slowed down by the limited offer of good quality products.
More mature markets, such as the UK, the Netherlands and Ireland, have seen increases in logistics warehouse yields. Others, however, where returns were relatively high, showed a decline. The current average yield stands at 8.2%.
In Italy, the rental business is still penalized by the limited supply of high-quality warehouses. However, there is an increase in construction activity, especially in the Milan area.
Projects currently underway include large logistics centers located in Arese, Lodi and Piacenza, which will significantly increase the space on offer. However, given the strong interest of international users for modern spaces in the said area, part of the new offer is currently already pre-leased.
Investor interest grew during 2001 in the wake of the activity of real estate funds. In 2001, they acquired three logistics complexes for a total value of approximately €60 million, two of which were located on the outskirts of Milan. However, investment activity still remains limited due to the limited supply of high-quality warehouses. The best current yield is confirmed in line with the European average, in the range from 8.00 to 8.25%.
source: Real Estate Observatory
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