Logistics Real Estate Market 2022

A building designed for storage, order picking, or delivery is referred to as logistics property. While larger firms often have their own facilities customized to the unique needs of their products and business processes, some real estate landlords rent space to many tenants.

From the standpoint of commercial real estate, warehousing and logistics encompass all the intricate elements involved in the delivery, receipt, and storage of both tangible products and information about them.

The world continues to be faced with rising construction and transportation costs, the risk of multiple interest rate rises, and likely supply chain congestion, even as the global logistics market investment reached a record level of US$1.3 trillion in 2021 - up by 55 percent from 2020 and 21 percent from 2019 (CBRE USA Logistics Analysis). However, there is general agreement that the demand for logistics in a global context is not temporary.

When manufacturers buy the components and raw materials needed for production from suppliers, this flow of goods is known as procurement logistics. The management of purchased components and materials, distribution inside a factory, product management, packaging, and shipping to the warehouse are all included in production logistics.  Sales logistics is the most common type of logistics. In the past, distribution sites like wholesalers and retailers received deliveries mostly from delivery hubs and logistics warehouses. Lastly, Businesses with a goal of recovering and recycling used paper, plastic bottles, and empty cans are typical instances of recycling logistics.

In all of Europe, the logistics Real Estate market is still robust.

According to BNP Paribas Real Estate 2022 European Logistics Market analysis, The industrial & logistics market, which accounts for 23% of all commercial real estate, is once again setting new records for investment volume (+10% in Q1 2022). The majority of markets are still seeing mild yield compression, which is supported by healthy occupier fundamentals.

A fundamental demand driver for storage space is changing consumer behaviors that lead to an increase in online sales. In Europe, it represents 11% of all retail sales. Between nations, there are substantial disparities. Additional space will be required as reverse logistics and internet retail both develop.

Industrial real estate will be in high demand in 2022 due to record demand, rising rents, and investment activity. The growth of e-commerce, the expanding economy, population shifts, and the requirement for "safety stock" domestically will all contribute to the demand for additional warehouse space. 

USA Logistics and Industrial Real Estate

The world's top business real estate consultancy firm, CBRE, describes their analysis for industrial and logistics. The top emerging markets in the USA for distribution facilities will once again be those with expanding populations and improved connectivity to logistics hubs. The Southwest and Southeast will have rapid population growth, which will increase demand for logistics real estate in those areas. In 2022, there should be a considerable increase in activity in markets including Nashville, Las Vegas, Reno, Central Valley California, Salt Lake City, Central Florida, San Antonio, and Austin.

Additionally, businesses will attempt to offshore more manufacturing. In 2021, the production of American manufacturing was strong, supporting the fundamentals of real estate for manufacturing space, such as positive net absorption, decreased vacancy rates, and record-high rents. Tech, defense, auto, and medical companies will continue to lead the way in the upcoming year.

In France, The logistics market's fundamentals continue to be very strong.

Along with CBRE Europe’s response to Immostat data for the first quarter of this year. Although 2022 is off to a very strong dynamic, similar to 2021, there are still some questions about the year's end due to the current situation.As François-Régis de Causans, CBRE Investment Director explains, “In this context of uncertainty, products with secure long-term rental flows are still sought after by the majority of investors" Non-purchased products or products with short lease terms continue to appeal to those seeking to capture growth in rental values ​​and thus generate higher returns over the coming years.” 

Despite the structural and long-term attraction of this asset class, the short- and medium-term trends are not well understood, and the current environment is particularly complex.

Another industry leader in international logistics real estate with an emphasis on rising, high-growth markets is Prologis Inc. The company held investments in properties and development projects planned to total about 1.0 billion square feet (95 million square meters) in 19 countries as of June 30, 2022, either on a completely owned basis or through co-investment ventures.

As President Ben Bannatyne of Prologis Europe announced, “Our Europe business had a record-breaking fourth quarter and year. Demand for logistics space is at an all-time high, with new starts - led by build-to-suits - on the rise. Rents continue to rise as supply tightens and customers look to increase the resiliency of their supply chain. Prologis provides the best properties in the most desirable markets, powered by our global scale and focus on innovation, technology and data centricity. Our success is driven by our focus on our customers’ needs and the value we deliver that goes well beyond our real estate.”  

Amidst the Covid-19 crisis, the logistics real estate market appears to be one of the most resilient and successful investment sectors. Short-term worries about corporate sectors faltering in the Covid-19-induced global recession will be outweighed by the significant long-term boost to demand from expanding e-commerce volumes and the reconfiguration of just-in-time global supply chains.

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Published in : Market Studies, REITs, Tops   By : Rock & DATA   On : November 2, 2022



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