Over the past decade, the Dutch logistics property market has transformed from an atypical owner occupier sub-market as part of the industrial property market to a mature and hot investment market that compares to prime commercial investment asset classes. According to the research report ‘Rewind & Fast forward. Dutch logistics property: the past- and next decade’ published today by international real estate advisor Savills, the key market indicators have changed considerately over the past decade.
Biggest changes in the Dutch transport and logistics service providers sector
Over the past decade, the global economic upswing has brought increasing consumer spending and industrial investment across the Eurozone. In quantitative terms, this has undeniably benefitted the T&L sector in the Netherlands too.
The percentual volume changes of goods imports (+45.3%) and -exports (+44.4%) over the past 10 years show that the T&L sector has grown stronger than GDP economic growth overall (+26.8%).
Although quantitively the sector has benefitted from the economic upswing as transported volumes have increased and turnover in the sector has increased, the T&L sector is a low-margin industry and ever decreasing margins have resulted in a race for efficiency. In effect this has meant widespread consolidation across the sector and eager investment in (new) technology.
Most remarkable developments in the logistics occupier market
To support modern efficient operational processes, the requirements for logistics real estate have increased considerably too. The demand for, and development of, modern and increasingly large properties has taken flight in recent years.
Reflective of the strong occupier demand (take-up +480%) and decreasing vacancy (-20%) during the past decade, even as stock grew considerably (+40%), rental growth in the logistics sector consistently performed above inflation level (CPI based +14.57% over the last 10 years). This was mainly due to decreasing incentives and, as a result, increasing net effective rents. Over the last year, this has now also translated into increasing prime gross rents in some of the key logistics hotspots.
Effects on the logistics investment market
Over the past decade, the logistics investment market largely followed the occupier market, which is confirmed by the index of logistics take-up and -investment. However, since 2017, investment volumes, in relative terms, have grown considerably stronger than take-up volumes.
A key driver that has encouraged this development has simply been the previously comparably ‘cheap’ Dutch logistics properties, given that the market was once considered a less mature investment market. However, as the market has professionalised over the past decade, it has shifted from a largely owner occupier sub-market within the industrial property market to a mature investment market: currently, over 70% of the logistics assets are being leased. Historically, this percentage was only approximately 50%.
The (international) capital directed towards the Dutch logistics market has accelerated in recent years as this market has matured and professionalised, and as investor confidence has grown. This is confirmed by an investment volume growth of less than 100 million Euro in 2010 (1% of total investment volume) to 2.6 billion in 2019 (13% of total investment volume), with the share of cross-border investment taking up over 80% of the pie, compared to 25% at the start of the last decade.
Niek Poppelaars, Co-Head of Logistics & Industrial at Savills in the Netherlands, says: “As the availability of prime logistics investment product has steadily decreased, and as increasing pressure on the occupier market has resulted in (foreseeable) rental growth in some locations, yield levels have compressed to levels traditionally only achieved in prime commercial asset classes such as offices and retail. From 7.35% GIY in 2010, moving towards 4% today, this confirms that logistics assets as an investment class have become increasingly of interest as an alternative to investment in offices and residential portfolios during the 10’s.”
Douglas van Oers, Co-Head of Logistics & Industrial at Savills in the Netherlands, adds: “Although the investor focus has largely been on prime logistics assets over the last 10 years, now that it is becoming increasingly difficult to acquire prime assets or to participate in new developments, either because of lack of land or regulatory hurdles such as the nitrogen issues, we also see increasing investment dynamics in the secondary (upcoming) market.”
The full report can be downloaded here.