The average European logistics yield dropped 14 basis points (bps) to 5.95% in Q2 2018, the first time it has fallen below 6% since Cushman & Wakefield began regularly tracking the three main property sectors in 1992, according to the firm’s DNA of real estate report.
All logistics markets monitored in Germany, Italy and Sweden recorded inward yield movements during the second quarter, and a couple of UK locations also contributed to the overall shift down to 5.95%.
About a third of the monitored office locations saw some yield compression with a prime weighted average down from 4.49% to 4.42%. In contrast, high street retail yields softened in a few locations and the overall prime yield moved out by 1 bps to 4.19%.
'Logistics properties have increasingly become a desirable asset for real estate investors on the back of the growth for e-commerce and the streamlining of supply chains, and now account for a growing share of investment activity supporting a strong reduction in yields over this period,' said Lisa Graham, head of EMEA Industrial and Logistics Research & Insight, Cushman & Wakefield.
'Yields in almost all monitored markets are at their 10-year low, although we believe there is still room for further downward movement in selected markets during the second half of the year,' Graham added.
Despite the fall in the prime logistics yield below 6%, the gap relative to office and retail is still higher than in the previous cycle, Cushman said.
Office rents grew at a robust rate of 0.8% quarter-on-quarter several markets – across different countries and regions in Europe – seeing increases up to 5%. Limited rental growth was recorded in the retail sector while rental correction in Turkey offset this growth, resulting in the weighted average rent 0.1% lower than the first quarter.