HighVest Capital | June 5, 2024
Logistics Market Overview
The logistics market has witnessed significant growth in recent years. However, in 2023, this sector faced substantial challenges due to fluctuations in global capital markets, resulting in reduced investments and leasing activities. Despite these economic hurdles, logistics remained the largest sector by investment volume, though it saw a sharp decline to €2.4 billion. For 2024, we anticipate a modest increase to €2.75 billion, contingent upon the interest rate policies of the ECB and the Fed.
Trends and Developments
Cooling User Market and Increasing Vacancies:
Declining consumer spending is leading to a more subdued user market in the logistics sector.
This trend results in a slight increase in both visible and hidden vacancies.
Shorter Lease Periods and Reduced Expansion:
Logistics service providers are demonstrating less expansion ambition.
There is a noticeable shift towards shorter lease periods, reflecting caution in long-term commitments.
Slowing Growth in Prime Rents:
Although overall vacancy rates remain low, the rise in prime rents is gradually decelerating.
This indicates a potential stabilization or correction in the market.
Value-Add Opportunities in Older Properties:
Investors are identifying opportunities to add value to older, vacant properties through sustainability initiatives and more efficient space utilization.
Developments such as high bay distribution centers or multi-story distribution centers are gaining popularity.
Misalignment in Buyer-Seller Price Expectations:
There is still significant interest in core and core+ real estate categories.
However, the price expectations between buyers and sellers are currently misaligned, leading to fewer transactions.
Dominance of Value-Add and Opportunistic Investments:
Due to the misalignment in price expectations, value-add and opportunistic investments are expected to dominate the market in 2024.
Investors are preparing to enter core and core+ markets but are waiting for more favorable conditions, such as lower interest rates from the ECB and the Fed.
Expansion into Sub-Assets and Geographic Diversification:
Some investors are expanding their strategies to include sub-assets like light industrial and last-mile logistics due to a shortage of traditional investment products.
There is also a trend towards geographic diversification, with investors exploring opportunities in non-traditional logistics hotspots.
Potential in Non-Traditional Hotspots:
Areas such as Flevoland, Zwolle, and South Limburg are showing greater potential market growth compared to classic popular regions.
These locations are becoming increasingly attractive for logistics real estate investments.
Caution Amid Market Uncertainty:
Despite the opportunities, some investors remain cautious about venturing into new areas due to concerns about market performance and potential risks.
This caution is influenced by broader economic uncertainties and the impact of global capital market fluctuations.
Logistics Market Analysis
An increasing number of investors are moving away from traditional logistics hotspots, though not all are confident enough to take this step due to concerns about market performance in these areas. Our analysis indicates that potential market growth in non-traditional hotspots like Flevoland and Zwolle is greater than in classic popular regions. Similar growth is observed in South Limburg, in areas such as Tilburg and Venlo. Consequently, logistics real estate in these locations is likely to be a compelling investment opportunity.
HighVest Capital has been at the forefront of channeling global capital into Dutch real estate. "The Netherlands offers a unique blend of safety, growth, and sustainability," says Sheran Nasrulah (Managing Director) of HighVest Capital. "Our investors are particularly keen on the market's long-term prospects, driven by solid fundamentals and progressive urban planning."
For further insights and opportunities, visit HighVest Capital at highvestcapital.com.
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