CTP sees ‘affordable outlook’ for valuations for rest of the year

Listed European logistics developer and investor, CTP, has seen quite a shift in valuations in the past 18 months and has taken in the vast majority of yield widening in its valuations – 70bps over the last 12 months.

But the company now feels that the logistics sector and especially the markets it focuses on – Central & Eastern Europe - 'will not see much more material yield widening’ while strong rental growth continues.

Maarten Otte, head of investor relations, said CTP’s recent rental evidence means that in terms of valuations, the company has a ‘comfortable outlook’ for the remainder of the year and through 2024 as rents continue to grow.

Some transactions being completed in Germany are happening at high 4% and low 5% levels.

‘Our starting point in valuations is that we have already had higher yields in our markets – if you look to our gross portfolio yield it is 6.6%, and for our reversionary yield it is 7.1%. But they started from a higher basis, so despite the 70bps yield widening in the last 12 months we were able to offset that with rental growth.’

Two weeks ago, the company held a ‘capital markets’ day when it revealed it has managed to sign 7% more leases in the year to August than the previous year.

The average monthly rent per square metre is 11% higher than in 2022, highlighting the strong operation demand in its regions.

Boost from nearshoring trend
Otte said its regional CEE focus was benefiting from the nearshoring trend. It currently has around 900,000 m2 of Asia clients, typically production companies, who have moved manufacturing and supply for Europe to Europe. Earlier this year, the company revealed it was opening an Asia office.

‘If you talk to global manufacturers, they have shifted their model by producing in Central and Eastern Europe. They chose CEE for the substantially lower labour costs (all-in costs can be one third lower than Germany) and infrastructure improvements in terms of highways in Poland for example, which is due partly to European funds.’

Examples of companies in its portfolio that are nearshoring include Nidec, an occupier in Serbia, and Yanfeng, which is in five locations and is a sub-supplier for car brands.

Said Otte: ‘If you want to be delivering to the BMWs of this world, they will say suppliers need to be in close vicinity. There are more examples in the portfolio such as Inventec, a Taiwanese company.’

On higher interest rates, he said the higher cost of development was affecting everyone, which does have an impact on the supply side.

CTP uses equity for its projects, and then arranges debt on completed projects later. It has a landbank of 20.7 million m2, of which 65% is at its existing parks. The company focuses on extending space at its existing locations, thereby creating ‘ecosystems’.

Explained Otte: ‘This allows us to foster new growth. Two-thirds of our new leasing is with existing tenants.’


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