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Can we see definite signs that we are ahead of the expected recovery in European industrial and logistics market?

posted Oct 1, 2010, 3:17 AM by Joan Miquel Joaquim   [ updated Jun 20, 2011, 2:10 PM by X Juez ]

Personally, I think so. For the latest data from international reports of the first two quarters of 2010, as well as feelings and conversations with our customers, I think we can begin to observe signs of recovery in the European industrial and logistics markets that so many of us have been waiting.

The events during this 2010 in the sixteen eurozone countries are not helping the recovery of our major real estate markets. But signs of recovery in major economies, with projected positive growth rates for 2011, coupled with the austerity policies implemented by governments in the eurozone, it seems that is helping to develop some signs of confidence to investors and tenants that allow the author of this article to be optimistic for a future that may not be as far away as some try to foresee.

It is true that not all European property markets are performing well and each has its merits, it is also impossible to analyze with a global vision and unique as the U.S. .But you can intuit certain trends, such as the evolution of income, where stability has prevailed in most of them. Should also note some fluctuations outside the media, as is the case in Dublin which recorded a fall in prime rents over 10% last quarter.

If we look at specific cases such as the UK, we can see that the adjustment of fiscal policies by the government, job creation, a gradual increase in consumption, the recovery in house prices, rising exports and an expected GDP growth of 1.1% in 2010 and 2.1% for 2011, let us see the beginning of the British economic recovery. And can not be otherwise, this positively affects the future prospects of both financial and real estate markets of the third European economy.

In regard to British industrial and logistics market, demand is experienced stronger growth than in other European countries, reflecting this in a stable income over all local markets. The increased space available and the decrease in the level of income that occurred in the past two years has enabled the relocation of many operators and producers to more prime areas of major cities, taking advantage of the opportunity to reorganize their production processes and optimizing the entire supply chain.

For the first time in five years the availability of logistics and industrial buildings in the UK has remained stable due to increased demand before and inactivity commented at the launch of speculative projects. This has also benefited from new buildings, which due to the better conditions have been obtained have allowed tenants to lower their rates of availability.

This increased activity was reflected immediately in the investment market, which has experienced a marked increase in the volume of business transacted with a clear dominance of the national capital funds. Of course, the prime locations continue to dominate the volume of transactions, secondary markets being in a second term and with little interest.

If we look now at the industrial and logistics market in France, with the Ile-de-France (Paris) as the prime example, we can begin to see positive signs in the first half of 2010, where demand particularly in buildings over 10,000 square meters has revived sharply. This revival has occurred mainly in the Ile-de-France market, leaving even the background of the other regional markets activities.

But maybe we still can not see visible results to stimuli in the French economy is expected that these appear in the coming months and that the worst of the crisis has already passed in regard to demand and income levels. In addition, the volume of investment transactions has doubled over the same period last year, again mainly concentrated in the Ile-de-France, leaving a second term in secondary markets, like what happened in in UK.

So, not getting carried away by the euphoria, we firmly believe we can be a little more optimistic. We do not know exactly how we will achieve levels or how quickly, but they certainly are taking the stage for the expected and wished revival of European industrial and logistics sector.

Enrique Escribano
Investors Manager