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CBRE Global Research and Consulting

INDUSTRIAL SUPPLY -3.6% y-on-y

The Netherlands Industrial MarketView

RECOVERY FUELLED BY TRANSPORT VOLUMES AND INVESTMENT TURNOVER

Quick stats

Hot topics

Growth of transport volumes as world trade increases

Increasing investment turnover, fuelled by sales of prime distribution centres and multi-let portfolios

Sharpening yields for prime logistics property

Economic drivers suggest the recovery of the transport sector is advancing

Top performing logistics hub

With global trade picking up and prospects of enhanced economic recovery, the Netherlands has re-established itself among the top performing logistics countries in the world. In the 2014 World Bank Logistics Performance Index (LPI), the Netherlands ranks second – only just being outperformed by Germany, its most important trade partner.

The favourable characteristics of the logistics market are reflected by an increase in trade as both transport turnover and cargo volumes picked up in H1 2014. The port of Rotterdam witnessed a trade volume growth of 0.6% y-o-y, while air freight at Schiphol International Airport increased by almost 9%. Furthermore, the transport sector witnessed turnover growth for the third consecutive quarter.

Backed by increasing e-commerce sales, growth of cargo volumes is expected to carry on in H2 2014, with forecasts for another 1.9% growth in 2015. While these developments are likely to fuel the demand for distribution centres on the medium- to long run, the direct impact on the occupier market has remained rather limited as yet.

Hunting for yield

After four years of moderate activity, the upturn in the investment market was demarcated by the entry of private equity on the Dutch logistics market in 2013. In addition to logistics property, interest in multi-let assets resurged. Investment activity intensified in H1 2014, contributing to the highest semi-annual investment turnover since 2008.

While Blackstone’s LogiCor fund strengthened its presence within the Dutch logistics market, traditional parties such as Montea, Prologis and WDP remained responsible for the largest share of investments. Most notable within the multi-let property market are the recent acquisitions by Mbay Light Industrial and the establishment of the Henley360 investment fund, which specifically targets the European industrial market.

Dominated by persistent policies of low interest rates by both the US and the Eurozone, investors are in search for yield against a reduced risk profile. The weight on capital, supplemented by prospects of trade growth and increasing industrial production, fuels the appetite for logistics and multi-let properties in the Netherlands.

2014 H1

LOGISTICS SUPPLY 15.6% y-on-y

LOGISTICS TAKE-UP -58% y-on-y

INDUSTRIAL INVESTMENT 165% y-on-y

2014 H1

Prime yield logistics 6.5% (NIY)

Prime yield multi-let 9.0% (NIY)

Prime rent logistics 55 €/sq m/yr

Prime rent multi-let 75 €/sq m/yr

INDUSTRIAL TAKE-UP -6.2% y-on-y

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Declining bankruptcies

In addition to an overall economic downturn during the financial crisis, increasing logistics vacancy was aggravated by a large number of transport sector bankruptcies. From the second half of 2013 onwards however, the amount of bankruptcies has dropped substantially, reinforced by increasing international trade.

Furthermore, domestic demand is showing careful signs of recovery. The European purchasing manager index (PMI) reached its highest level in more than three years. Particularly business services with a focus on domestic markets showed improvements, which suggests domestic demand in the Eurozone is likely to start picking up. In turn, this might result in increasing demand for logistics space and stabilising vacancy rates.

Occupier demand targeting modern facilities

With overall vacancy rates for logistics property slightly increasing, vacancy in modern, high-grade facilities has in fact shown a declining trend. In properties with a construction date of 2009 and later, nationwide availability merely amounts to 144,000 sq m. With respect to post-2010 facilities, vacancy is even considerably lower with approximately 21,000 sq m.

This split is partly caused by more rational planning of new developments, but it also reflects a shift in occupier preferences as demand is primarily driven by qualitative upgrading and consolidation strategies. As the current stock lacks large-scale properties on strategic locations, built-to-suit developments are responsible for about 50% of total take-up. These sites are increasingly located at peripheral industrial parks, although they remain concentrated around the large traditional transport hubs.

Differentiated geographical pattern

While the overall availability of industrial property carefully declined, vacancy in the occupier market for multi-let increased slightly. In Rotterdam however, market conditions remain rather tight with a vacancy rate of approximately 5%. By comparison: in the other G4 cities vacancy currently moves around 22%. The strong performance of Rotterdam is also expressed by its logistics market in which merely 6% of logistics space is vacant. Also in Schiphol, the other mainport area, vacancy currently moves around 5%, reflecting stable occupier market dynamics despite modest take-up.

Chart 1: Cargo volumes

Chart 2: Transport sector bankruptcies

Chart 3: Logistics vacancy

Source: Port of Rotterdam, 2014; Schiphol Group, 2014

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Source: Statistics Netherlands, 2014

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Transport sector bankruptcies (% y-o-y)

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Chart 4: Logistics take-up

Chart 5: Logistics net absorption 2014 H1

Chart 7: Logistics & Multi-let investment

Chart 6: Logistics availability split

Chart 8: Prime yields (net)

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Location / Portfolio Type Quarter Region Purchaser Price (€ million) Size (sq m)

Pelican portfolio, 7 sites Logistics Q1 Nationwide Prologis 168.5 343,500

Nationwide portfolio Multi-let Q2 Nationwide Hansteen 106 270,000

Zander portfolio, 11 sites Multi-let Q2 Nationwide Mbay Light Industrial 78 175,000

Echt, Action DC Logistics Q2 Limburg WDP 56.2 73,000

BIP portfolio Multi-let Q2 Nationwide Mbay Light Industrial 44 106,000

Hattrick portfolio Logistics Q1 Nationwide LogiCor 34.5 56,250

Venray, Wattstraat Logistics Q2 Limburg WDP 30 40,000

Nationwide portfolio, 7 sites Multi-let Q2 Nationwide Mbay Light Industrial 23 53,000

Amsterdam, Hoogoorddreef Multi-let Q1 Mainports Rockspring 21.6 32,765

Harderwijk, Lorentz III Logistics Q2 Centre WDP 18 20,100

Location Type Quarter Region Status Tenant / User Size (sq m)

Nieuwegein, Het Klooster Logistics Q2 Centre New ND Logistics 30,000

Oss, De Geer Logistics Q1 West Brabant New Vos Logistics 24,980

Maasland, Oudcamp Logistics Q2 Mainports Existing Kraaijeveld 22,340

Harderwijk, Lorentz III Logistics Q2 Centre New Alcoa 20,100

Heerlen, Avantis Logistics Q2 Limburg New DocMorris 15,500

Moerdijk, Tradepark Logistics Q2 Mainports Existing DL Logistics 14,965

Etten-Leur, Vosdonk Logistics Q1 West Brabant New Bas Logistics 12,500

Moerdijk, Seaport Logistics Q1 Mainports Existing Boskalis 11,500

Someren, Sluis Logistics Q2 East Brabant Existing Dispolab 11,855

Rotterdam, Distripark Eemhaven Logistics Q2 Mainports Existing Intersprint Autobanden 10,950

Table 1: Key occupier transactions H1

Table 2: Key investment transactions H1

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CONTACTS

CBRE Netherlands

Machiel Wolters Director Research and Consulting Gustav Mahlerlaan 405 PO Box 7971 1008 AD Amsterdam t: +31 (0)20 626 26 91 e: machiel.wolters@cbre.com

For more information about this MarketView, please contact:

Dries Castelein Senior Director Industrial & Logistics Gustav Mahlerlaan 405 PO Box 7971 1008 AD Amsterdam t: +31 (0)20 626 26 91 e: dries.castelein@cbre.com

Michiel Assink Director Industrial & Logistics Gustav Mahlerlaan 405 PO Box 7971 1008 AD Amsterdam t: +31 (0)20 626 26 91

e: michiel.assink@cbre.com

Global Research and Consulting

This report was prepared by the CBRE Netherlands Research team which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.

Disclaimer

CBRE B.V. confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

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OUTLOOK

While underlying dynamics in the logistics sector remain favourable and are in fact improving, they have not resulted in an upswing in demand for logistics space as yet. However, in line with overall economic recovery, business confidence is carefully restoring. In turn, occupiers are likely to become less reluctant towards long-term business expansions, which might fuel the demand for industrial space. Meanwhile, e-commerce marches on, accelerating transport sector turnover and domestic and international trade volumes. Prospects of online retailing in Europe show double-digit annual growth figures in each of the next five years and its impact on the logistics sector will only increase. Nonetheless, take-up of logistics property will be primarily focused on modern, high-grade facilities.

Whereas investment activity is already surging after four years of economic downturn, investor appetite is expected to remain strong. Nevertheless, the availability of large portfolios is tightening which is likely to affect overall investment volumes. As such, new logistics developments will continue to be an important driver of investment activity, although it must be noted that investor demand usually targets pre-let facilities. The multi-let market is showing stable market dynamics which has fuelled sales volumes in the investment market after a period of devaluation. In this case too, however, the amount of large multi-let portfolios on the market is declining.

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Raphaël Rietema Consultant Research and Consulting Gustav Mahlerlaan 405 PO Box 7971 1008 AD Amsterdam t: +31 (0)20 626 26 91

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