For property investors, formerly dowdy warehouses have become sexy bets on online commerce in recent years. Singapore’s GLP, which runs $120bn of property funds, is Asia’s largest operator of warehouses. On Wednesday it announced it has raised €1.2bn for a European vehicle investing in the sector.
War in Ukraine and ever-tighter supply chains render the steady returns from warehousing and logistics more attractive. That appeal enabled Spain’s Mecalux — also on Wednesday — to launch plans for a summer listing. It is seeking a $3bn-plus valuation even as Russia’s invasion of Ukraine has put a brake on European new listing activity.
Yet both these pale in comparison with Prologis’s efforts to buy Blackstone’s European warehouse network Mileway, announced earlier this week. The deal, valued at just over €21bn, would be the largest private real estate transaction ever.
Blackstone created Mileway in 2019 to house its last mile logistics and dark kitchen assets (for online food delivery). The US asset manager had been expected to seek a buyer for Mileway this year. Instead, swayed by robust demand for warehouse assets, it opted last month to offer existing investors the chance to recapitalise the business.
Blackstone has form in this sector. Its previous European warehousing venture Logicor was sold to China Investment Corporation for €13bn in 2017.
Demand has driven prices for industrial assets higher. Valuations for average grade warehouse properties rose 23 per cent in Europe last year. Yields for the best last mile assets have fallen as low as 2 per cent in places such as London, according to analysts at Green Street.
Demand for larger warehouses is also rising as reshoring and “just in case” supply chain management trends accelerate. The UK’s Tritax Big Box, at its annual results, promised to accelerate investments to keep up with demand.
Despite their popularity, opportunities still exist. Average rental growth at about 5 per cent a year across Europe attracts buyers. Safe and sexy together rarely describe any investment. In today’s uncertain environment they do apply to warehouses and logistics.
Source: Financial Times
