Why Invest in Europe

Note: EU statistic based on national vacancy levels of 9 countries (Deutschland, Frankreich, Vereinigtes Königreich, Niederlande, Polen, Tschechische Republik, Slovakia, Spain and Italy).

European markets are undersupplied in terms of logistics stock.

As it’s illustrated in Exhibit 2. Over time, this adoption rate is rising, creating structural demand. European markets are undersupplied as Pan-European networks and institutionalization of the asset class only emerged in the early 2000s, driven by the Schengen agreements. The U.S. market is more mature, with initial drivers being the development of the interstate highway network in the 1950s. The level of stock per capita across Europe differs as the role in the supply chain (Pan-EU or domestic focus) and maturity differ. Particularly, CEE and Southern European countries are relatively undersupplied. Expectations are that this trend of a rising adoption rate will continue, although it is not expected to reach U.S. levels due to differences in geography and wealth.

Note: EU statistic based on national vacancy levels of 9 countries (Deutschland, Frankreich, Vereinigtes Königreich, Niederlande, Polen, Tschechische Republik, Slovakia, Spain and Italy).

Strong compression and expansion

Cap rates in Europe and the U.S. have seen a fairly comparable trend of strong compression from 2010 to 2022, followed by expansion and stabilization in the last two years. In the long term, the cap rate spread between both regions has narrowed to close to zero, reflecting the rising institutionalization levels in Europe.

‘DNA’ differs, presenting both opportunities and challenges

By reviewing a range of market features, it’s clear that the structure of the logistics markets in the two regions differs. Europe stands out in terms of prioritizing ESG and stricter regulation, while the U.S. market is more transparent and institutionalized, but a range of historic KPIs are more volatile.

Europe is considered a global ESG frontrunner with increased priority among occupiers as well.

ESG is important in the U.S. as well, but the overall consensus is that Europe is further ahead across investors and occupiers.
To conclude, at first glance, logistics buildings and types of locations are fairly comparable in both regions. However, beneath the surface, there is a wide variety of characteristics, offering opportunities and challenges. The European market offers unique and attractive investment features supporting long-term growth.

From a demand perspective, these drivers include undersupplied markets, e-commerce growth in line with pre-pandemic levels and increasing nearshoring activities taking place on the continent. From a supply perspective, rising barriers to new supply and regulatory measures mitigate the risk of oversupply. These supply and demand dynamics support long-term rent growth and continued capital interest. The U.S. market is more mature and has shown strong rental growth in the last decade.