Review of MIPIM
Glut of capital, shortage of products, sunshine
Hamburg | 25.03.2015
The visitors from Hamburg were probably especially happy to enjoy some sunshine on the Cote d’Azur. During MIPIM, the weather outside was fine. Which seemed very appropriate, because the market for industrial property investments in Germany is now experiencing a sunny period of its own.
The low interest rates and vast amounts of cash chasing investment opportunities are now benefiting this segment of the market enormously. The consequent rise in prices and diminishing returns on office and retail properties continues to drive more investors to investigate the market for industrial and logistics real estate. These properties are no longer viewed as just a way to diversify a fund. Talks with fund and asset managers indicate that the number of buy orders for purely logistics or industrial properties will grow further. The clients are, first and foremost, pension funds and insurance companies. The lower price level for transactions is sinking well below the €20m mark, sometimes it even slips below €10m. Although the choice is limited, investors prefer to buy portfolios.
Most investors are guided by reason when they decide to buy, so the premium return is not expected to fall below 6% for the time being. Few single assets are available in the core segment of the market, because developers are increasingly transferring their projects into “own brand” funds. This is one reason why demand for value add investments is rising.
Asset managers specialized in the field are also becoming more confident about their ability to stabilize real estate in B locations. At the regional level, a great many family offices continue to undertake value add and opportunistic transactions. Thanks to low interest levels, company managers are increasingly inclined to buy and occupy their own corporate premises. They compete to some extent with opportunistic investors looking for value add deals.
It remains to be seen who gains the edge in the race for products. And that ends our news and “weather report” from the MIPIM.
Stefan Harder, head of industrial, warehouse, logistics