Logistics against wind and tide? (Arthur Lloyd Logistics)

Didier Terrier
© Arthur Loyd Logistics – Guilain de Coligny

The French logistics real estate market marks time with 2.3 million m² placed between January and September 2022, down 14% compared to 2021, notes Arthur Loyd Logistique in its latest study. “Although user activity was maintained in the first half of the year, it nevertheless experienced its weakest performance in the third quarter since 2015, with only 743,000 m² marketed”, specified Didier Terrier, CEO. “The uncertainties weighing on developments in household consumption and business order books, in a macroeconomic climate deeply upset by the war in Ukraine and the energy crisis, today force some customers to wait and see,” he adds.

However, the slight decrease in the major sectors of the backbone should not hide a good performance in the Paris, Lyon and Marseille hubs, where take-up has reached 1.4 million m² since the beginning of the year, thus increasing by 54% compared with 2021. Although the volumes acquired or leased are on a downward trend in Hauts-de-France, after an exceptional year in 2021 they are no less than 19% above their ten-year average with 369,000 m² leased.

“The decline in the secondary sectors, which began in 2020 after a record year in 2019, has continued over the past nine months: only 585,000 m² have been placed there, i.e. a decrease of 35% compared to 2021”, notes Didier. Terrier. The three leading poles – the Orleans region, Grand-Est and Occitanie – which account for 62% of the total marketed volume, have thus all experienced a decrease in activity. Outside the backbone, only the operation increased regarding the niche of 10,000 – 19,999 m2, which represents 37% of the total utilization, i.e. their third best performance since 2011. Conversely, transactions of more than 40,000 m² fell sharply, with take- down by 70% in this area, notes Arthur Loyd Logistique.

Nine transactions for Lidl

While the volumes acquired or leased by service providers fell by almost 500,000 m2 in 2022, after an admittedly unusual year in 2021, shippers saw a slight increase in activity by 1.3 million. m2 marketed. The market is nevertheless highly concentrated: the three most active retailers in France thus accounted for 87% of the total volume taken by mass distribution. Among them, Lidl stood out in particular with nine completed transactions totaling more than 400,000 m². E-commerce specialists, manufacturers and more specifically wholesalers show a sharp decrease with only 554,000 m² placed in 2022, compared to 1 million m² a year earlier.

While the new space or space to be built remains the main support for the market, representing 61% of the total marketed volume, 70% of the decrease in utilization recorded in 2022 relates more specifically to this segment of activity. “Developers today also face three major challenges. To the increasing complexity of obtaining building permits – generated by mobilization against the artificialization of land – economic difficulties have recently been added, caused by greater volatility in construction costs, but also financial in nature, due to more limited access to credit.” explains Didier Terrier. “It is not surprising in this context, and although the supply is relatively limited at present, that rental values ​​are experiencing an upward trend and reach – on a weighted average – 51 euros per m2 and per year for Class A buildings in France, this after 6 years of relative stability in most sectors,” he adds.

The stock of supplies available within 6 months remains stable in France, where it reached 2.1 million m2. While the markets in Lyon and Paris are still experiencing a phenomenon of strong land tension with 28,000 and 661,000 m² available respectively, the stock is nevertheless showing significant progress in Hauts-de-France, where it peaks with 644,000 m² and thus regains its point peak in the year 2020.

“However, the notion of a cyclical market, which is often used to describe the segment of commercial real estate – and especially increases and decreases in activity in the latter – is not synonymous with a return to the practice of the past, even more so for logistics. property. For example, coming the significant strengthening of the framework that regulates the conditions for the artificialization of the earth, which aims to be part of the long-term, today to break down the idea of ​​an easily accessible country outside the big cities, an idea that nevertheless led to the creation of ​​this new type of asset almost 30 years ago. Barring a collapse in the user market, or a sudden reversal in the attitude of the legislator, the time has therefore also come for the abundance of the logistics land to end. It is in this changed legislative framework that the problem of valuing logistics assets now arises, as it has the advantage of being located on land that is already secured”, concludes Didier Terrier.

Investment: new record for commitments

1.3 billion euros were invested in French logistics real estate in the third quarter of 2022 alone, a stable figure compared to 2021 and 2019, boom years for this asset class. “Observers could have expected a sharp slowdown in the investment market given the recent deterioration of the economic environment. This has not happened if we consider the transactions already completed: a total of 3.4 billion euros were committed between January and September 2022, i.e. an increase of 22% compared to 2021, already exceptional due to its high level of activity.” , notes Nicolas Chomette, associate consultant specializing in investment at Arthur Loyd Logistique.

The increase in the total invested volume is explained more specifically by a significant increase in unit transactions, with 1.6 billion euros committed to this type of transaction over the past nine months. Note the completion of a large amount of unspecified transaction, carried out at the initiative of GLP in Denain (Hauts-de-France). Renault’s disposal of its asset in Fouchères (Burgundy), sold to Argan, also illustrates the dynamics of real estate outsourcing. In a context with more difficult access to credit, sale & leaseback can thus more generally become a mainstay on the market, predicts Arthur Loyd Logstique.

The portfolio segment remained more or less stable with 1.8 billion euros invested in nine months. The third quarter was more specifically characterized by a very large volume operation, carried out at the initiative of Prologis. The amounts added in connection with transactions of more than 200 million euros nevertheless fell, a decrease of 25% compared to 2021. These were medium-sized transactions – between 50 euros and the market, at a level of 1.9 billion. Transactions of less than €50 million were on the downside.

A correction of the registered premium rate

Anglo-Saxon investors, more specifically American and British, have significantly increased their positions in the French market, with almost 2 billion euros committed in 2022, i.e. an increase of 39% compared to 2021. Singaporean players have also remained very active through the GLP and P3 Logistics Parks. Conversely, German and Canadian investors have significantly reduced their positions, representing only 10% of the total amount invested, compared to 32% in 2021.

“In a new context characterized by the sharp increase in inflation and the general tightening of monetary policy, investors have more generally taken note of the sudden change in the nature of the logistics real estate market” notes Nicolas Chomette, who adds: “a correction of the logistics premium has already been registered , ranging between 50 and 75 basis points. Nevertheless, the lack of visibility from investors suggests that interest rates will continue to decompress in the next few months. The fact is that the logistics asset is still attracting a lot of interest from a large number of investors, considering that lack of building supply, the maintenance of the rental market and the rising rental values. »

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