Blackbrook’s Luoma: ‘Sale-leaseback will be an extremely interesting space over the next 12 months’

The recent softening in leasing demand for industrial logistics is due to the current economic uncertainty and should soon pick up, according to Arvi Luoma, CEO and co-founder of logistics specialist Blackbrook Capital.

‘The hesitation was more visible in the first half of the year, but we are already seeing activity pick up, particularly in continental markets. The intense lack of supply across Europe keeps pushing rental growth and we expect that to continue for the foreseeable future,’ Luoma told PropertyEU on the sidelines of Expo Real in Munich.

His advice to occupiers is to start thinking about their needs in five years, not just today, as it may be difficult to find suitable space in the future.

Luoma also highlights the importance of near/friend-shoring and supply chain resilience, as well as the continued growth of e-commerce, as key themes that are underpinning long-term demand and rent growth for logistics space.

Blackbrook's investment strategy remains focused on building a portfolio of future-proof supply chain infrastructure across Europe, primarily through sale-leaseback transactions and the speculative development of logistics assets in regions with a significant supply-demand imbalance.

Against the current economic backdrop, Luoma admits that finding willing sellers and ‘bridging the bid-ask spread can be challenging’. As a result, activity is currently slower than Blackbrook would like, but the company expects this to change in the future.

‘In this high rate environment, the sale-leaseback, as a form of corporate finance, will likely form a significant portion of our investment volume as companies and their shareholders/sponsors will look for efficient ways to fund their growth and take advantage of the current market environment,’ explained Luoma.

‘Everyone is clearly eager to get going again and find ways to do deals. The year may end on a quiet note, however the expectation is that as we move into 2024 we are in a period of "light at the end of the tunnel.” Maybe this time next year we are truly on the up cycle,’ predicts Luoma.

Besides leaseback opportunities, Blackbrook is keen to find development partners to help it deliver the much-needed logistics space.

“We maintain a strong conviction that sale-leaseback will be an extremely interesting space over the next 12 months as high interest rates prevail, capital for mid-market credit is constrained, and the private equity sector remains active. Sale-leaseback, and indeed build to suit financing, should be in high demand as companies and sponsors explore alternative capital solutions,” added Luoma.

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