Covid-19 epidemic to unlock ‘massive’ capital reallocation towards logistics

The logistics real estate sector will see massive inflows over the next 12-18 months in a major capital reallocation by institutional investors as a result of the coronavirus pandemic, according to Umut Ertan, founder and partner of Germany’s Realogis-RLI Group.

Speaking about the impact of coronavirus on the property market for industrial, warehouse and logistics space, Ertan said over 100 institutional investors and family offices contacted by the company have confirmed their intention to increase the proportion of capital allocated to logistics in the near future.

‘Many are thinking about scaling back their investments in offices and business centres, large-scale specialist retail spaces, shopping centres and hotels or even eliminating them altogether,’ he noted. ‘Over the next 12 to 18 months, logistics will see an unprecedented run in terms of capital reallocation.’

In the USA, 30% of institutional capital is invested in the industrial sector, compared to just 15% for Germany.

Ertan said: ‘In the next ten years, the high-end logistics sector in Germany will see capital allocations of between 30% and 50% among institutional investors. Residential and logistics are the most crisis-resistant asset classes within the property sector as a whole. Looking at commercial property alone, logistics is the most crisis-resistant asset class.’