Due to COVID-19 and its negative impacts, 2020 will be a year most people will want to forget in a hurry – less so the movers and shakers of Belgian logistics. Indeed, logistics real estate assets became a somewhat unexpected safe haven in 2020 once the global pandemic displayed no signs of slowing down.
In this context, we look a little further into some Belgian logistics investments trends in 2020 which have shaped the market as a result of this whole new situation.
Due to successive lockdowns (including the mass closure of retail), and factors such as a willingness to avoid crowded spaces outside of containment situations, Belgian consumers shifted massively towards online retail. Retailers are reacting accordingly leveraging omnichannel strategies, integrating online sales, now no longer the exclusive realm of e-commerce players as we reported recently in our most recent dissection of COVID-19’s impacts in the Belgian retail market.
As consumer demand for such services grows, so does occupier demand for logistics facilities.
This in a market where vacancy was already close to non-existent; supply and demand for quality buildings was already subject to imbalance in favour of the former; and speculative projects have been few and far between, a consequence of the scars left behind from the GFC crisis in 2008 and onwards.
In turn, increased investor demand ensued, and prospective buyers are jostling to snap up assets at yields which would have raised several eyebrows pre-pandemic.
Increased occupier demand, low vacancy and the decreased risk environment thanks to strong end-user demand makes for very attractive assets. Furthermore, with few assets for sale on the market, the unprecedented investor demand noted in Belgian logistics real estate means more competition to acquire sheds. Consequently, prime yields have compressed at speed throughout 2020 – currently at 4.90% for assets with regular lease durations. Spreads with more conventional asset classes have reduced as a result:
Belgium CRE prime yields per asset class
Furthermore, there is substantial evidence of much more aggressive yield levels being registered for assets with slightly longer lease durations.
In 2021 this trend is expected to continue with spreads forecasted to reduce further to 15-25 bps, and our current forecasts indicate that logistics prime yields will be on a par with prime retail from 2022 at 4.25%.
As much as competition has increased for Belgian warehouses, certain potential acquirers do require specific conditions to be met.
Big investors will look for tickets as from EUR 35 million, but most investors will look at assets as of 15 to 20M in Belgium.Bart Vanderhoydonck, Head of Industrial Agency
A handful of marquee deals have already taken place in this regard in 2020. Investments in the EUR 35 million + bracket amount to close to EUR 240 million on their own out of EUR 280 million so far this year.
Belgium logistics – invested per asset volume (EUR million)
Our forecasts see no signs of demand weakening next year. New consumer trends have rapidly been engrained; hence logistics is all the more appealing that its risk profile has decreased. This to the extent that several developers and investors (local and international) are considering making the move into logistics from other segments of activity such as retail and residential, transitioning from entirely different asset classes such as residential and retail in some cases.
Are you considering Belgian logistics?
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Senior Research Analyst
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Head of Industrial Agency
+32 (0) 479 96 08 09
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