30. Januar 2012 
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Core logistics properties will be the hot product on the investment market in 2012
According to a recent study conducted by Realogis – one of Germany's leading advisory companies for industrial and logistics real estate – the transaction volume in Germany in 2011, alone in the modern logistics facilities segment, was around € 600 million*. That is a 20% increase from last year. „Core logistics properties will be the hot product on the investment market in 2012,“ says Umut Ertan, founding partner of Realogis. „We will see top yields of 6.66% among Trophy properties, because banks are financing this risk class with 70 to 80% borrowed capital, and the yield spread – i.e. the difference between the net return of an investment and the refinancing rate – is huge.“
In contrast, things look quite different with value-add properties and mixed portfolios with older properties in them. „In this segment banks have become very restrictive and are only willing to lend 50 to 55 percent,“ says Ertan. „That will press down on returns.“ In portfolios with exclusively modern logistics real estate outside the top locations and with a weighted term of five years, they will be around 8.75% in the first quarter of 2012 according to the analysis. Mixed portfolios with older properties will only be able to be sold at reasonable conditions for the vendors if they are in top locations. Here we are talking about gross initial yields of between 10 and a maximum of 10.5%.
Smaller buying market expected
Despite a larger yield spread, Realogis cannot detect the effect of a higher market value of properties outside the top locations at the moment. „Instead, risk premiums charged by banks on 5-year average terms will significantly worsen the financing conditions, and much higher equity ratios of 40 to 50% will be demanded,“ Ertan goes on to say. This will cut down the buyer market immensely. If the equity share was 30 %, many more buyers would be willing to invest, which would lead to more demand and higher prices. „But with an equity ratio of 40 to 50%, many can't and won't be able to honour their original offer,“ says Ertan. For this reason, the gross yields in the top locations with medium-term leases have not changed, and that although the gross yields for longer terms have fallen by at least 35 basis points. Ertan continues: „Outside the top locations, and especially with older properties, yields have even risen.“
These effects will be most apparent in portfolios with mixed, older properties – i.e. ten years and older – and with modern logistics facilities. „Here there is virtually no other alternative than to sell these in packages,“ says Ertan. Selling the more attractive and modern properties individually would never compensate for the lower returns on the older properties. So in some cases, older properties outside the top locations with an average term of 5 years will be traded at well above 10 or 11% gross initial rate of return. Ertan: „Only by mixing-in good, modern properties is it possible to sell at acceptable terms for the vendor above the current costs of sale.“
* Larger numbers than 1 billion in transaction volume can only be achieved by including existing properties; the so-called „secondary logistics“ that Realogis doesn't refer to as logistics properties, but as older warehouses or industrial real estate.
In contrast, things look quite different with value-add properties and mixed portfolios with older properties in them. „In this segment banks have become very restrictive and are only willing to lend 50 to 55 percent,“ says Ertan. „That will press down on returns.“ In portfolios with exclusively modern logistics real estate outside the top locations and with a weighted term of five years, they will be around 8.75% in the first quarter of 2012 according to the analysis. Mixed portfolios with older properties will only be able to be sold at reasonable conditions for the vendors if they are in top locations. Here we are talking about gross initial yields of between 10 and a maximum of 10.5%.
Smaller buying market expected
Despite a larger yield spread, Realogis cannot detect the effect of a higher market value of properties outside the top locations at the moment. „Instead, risk premiums charged by banks on 5-year average terms will significantly worsen the financing conditions, and much higher equity ratios of 40 to 50% will be demanded,“ Ertan goes on to say. This will cut down the buyer market immensely. If the equity share was 30 %, many more buyers would be willing to invest, which would lead to more demand and higher prices. „But with an equity ratio of 40 to 50%, many can't and won't be able to honour their original offer,“ says Ertan. For this reason, the gross yields in the top locations with medium-term leases have not changed, and that although the gross yields for longer terms have fallen by at least 35 basis points. Ertan continues: „Outside the top locations, and especially with older properties, yields have even risen.“
These effects will be most apparent in portfolios with mixed, older properties – i.e. ten years and older – and with modern logistics facilities. „Here there is virtually no other alternative than to sell these in packages,“ says Ertan. Selling the more attractive and modern properties individually would never compensate for the lower returns on the older properties. So in some cases, older properties outside the top locations with an average term of 5 years will be traded at well above 10 or 11% gross initial rate of return. Ertan: „Only by mixing-in good, modern properties is it possible to sell at acceptable terms for the vendor above the current costs of sale.“
* Larger numbers than 1 billion in transaction volume can only be achieved by including existing properties; the so-called „secondary logistics“ that Realogis doesn't refer to as logistics properties, but as older warehouses or industrial real estate.
