Online retail triggers investment in European warehouses

Investment climbed by 28% to EUR 21.7 billion (USD 22.9 billion), according to Jones Lang LaSalle, bloomberg.com reports. Anticipation of a prolonged rise in internet retail has sparked competition for assets, causing average yields to narrow to 7.8% in 2014, from 8.9% in 2013, according to broker DTZ Holdings, the source cites. Average yields for the best offices in Europe stand at about 5%.

About 94 million square feet (8.7 million square meters) of new warehouse space will be needed in Europe by 2020 to cope with rising demand from internet and food retailers, according to broker Savills Plc, and the industry will also benefit from productivity gains sparked by the European Central Bank’s monetary policy, said Joe Valente, head of research and strategy at JPMorgan Asset Management, teh soyce cites.

Investors including Blackstone Group LP’s Logicor have sought to buy large groups of assets to build scale quickly. More than 120 portfolios valued at about EUR 10 billion changed hands in 2014, about a third more by number than a year earlier, JLL said, teh source cites.

More than half of the investment in European warehouses was in the UK and Germany in 2014, according to Savills Plc. However, 9 out of the 10 countries with the highest GDP growth forecasts are located in eastern and southern Europe. Developers built 370,000 square meters of space without securing tenants in 2014, 67% more than in 2013. Even so, the competition for assets is discouraging some buyers from investing in the best-located properties.