Logistics and Real Estate 2018
Yesterday, October 19th, Croisette participated as a partner at Fastighetsvärlden’s seminar Logistics & Real Estate in Eskilstuna. The seminar highlighted the logistics market both from an investor point of view as well from a tenant perspective.
A conclusion is that e-commerce continues to be the main driver behind new logistics developments in Sweden. Owner-occupied facilities constitute some of the new developments, but the bulk is driven by the increasing amount of goods caused by the growth of e-commerce that forces third-party logistics operators to increase their warehouse capacity.
Cost efficiency is an important factor when choosing the location of a new warehouse as well as being able to reach the customers within 24 hours. A potential problem that was addressed during the seminar is the lack of supply of labor as the automated warehouses, which are becoming more and more frequent, demand a skilled labor force. This will most likely lead to an increase in the attractiveness of locations where logistics education is offered.
The number of new logistics developments will continue to be at a high level the coming years since retail sector growth continue to be primarily driven by e-commerce. Last-mile deliveries was also discussed and the main challenge in Stockholm is to find logistics premises close enough to the city center to be able to shorten the time of delivery. Since centrally located land for warehouse use is in short supply, a potential solution could be to build flexible premises in parking garages beneath new residential developments that could easily be transformed into logistics premises in the future.
From an investor perspective, logistics has been an attractive segment to invest in during the past few years in Sweden. Both Swedish institutional capital as well as foreign investors have been active in buying logistics properties. Sweden’s high performing economy and low interest rates have pushed down the prime yield which is now approaching 5% on average, although a few deals have even been observed below 5%. The main issue for logistics investors is the lack of investment opportunities, why many of them also acquire land to develop new logistics properties themselves.
"It has been a very interesting logistics seminar giving us the opportunity to hear how the logistics market is developing in Sweden and what potential issues that might lie ahead. That e-commerce is, and will be, a driving factor for new logistics developments aligns well with Croisette’s view on how the market will develop. Another interesting area is last-mile logistics where we believe that warehouses with the right qualities will provide a good return for investors during the coming years as the market rent will continue to increase. We don’t see any signs that this increase will slow down as the total industrial stock in Stockholm continues to decline as industrial areas close to Stockholm is being converted for other use due to the growth of the metropolitan area. This will rather strengthen the rental increase we now are witnessing”
- David Almqvist, Head of Transactions at Croisette Real Estate Partner in Stockholm.