Article
The megatrend of growth in the logistics sector is continuing unabated, which is making logistics real estate particularly attractive for investors. In a market with generally insufficient investment options, industrial real estate offers a very appealing investment opportunity.
May 9, 2023
The major driver behind the logistics boom in recent years has been online trade, which was boosted by the COVID-19 pandemic. The pandemic having ended does not seem to have stopped this growth either. HANDELSVERBAND.swiss currently estimates that online trading in 2022 will maintain the high level seen in the previous year. The polling institute GfK1 expects an increase of as much as 8–10% for 2023, which will drive the entire logistics market further still.
CS Real Estate Fund LogisticsPlus is the oldest logistics real estate fund in Switzerland, having been launched in September 2014. It directly owns the logistics real estate. It comprises a portfolio with a market value of CHF 917.5 million and currently 26 properties, including a development project (as of 9.30.2022).
The investment properties include diversified logistics buildings and logistics-related real estate investments, as well as production premises in light industry and other commercial properties.
Online retailers need roughly three times as much logistics space as traditional retailers. They are looking for this space mainly in cities and densely populated metropolitan areas, which is why many companies, including online retailers, are now building their own real estate for logistics purposes. This is reflected in analyses of the building applications made in 2021. The result is that although logistics real estate is being built, it is often not easily accessible to investors.
Investors are therefore focusing less on pure logistics real estate (such as classic distribution centers) and more on industrial real estate. This mainly comprises production premises for light industry, known as "light industrials." From the perspective of the Global Real Estate unit of Credit Suisse Asset Management, the light industrial subsegment is currently offering greater yield opportunities than traditional logistics properties – an opinion shared by the light industrial specialists at Berlin-based Inbright. However, they point out that the higher yield expectations are offset by higher management expenses and more specific requirements from tenants2. The German real estate consulting firm Colliers considers the attractive locations with considerable land value, the potential for increasing the rental value, and the highly diversified range of usage options to be the key drivers behind the growing interest in light industrial real estate.
Unlike logistics tenants, who usually combine the lease terms with the terms of their existing client agreements, production companies are less mobile. This means that real estate in the light industrial segment is often leased over a very long period of time.
Credit Suisse Real Estate Fund LogisticsPlus holds three promising items of real estate in the light industrials segment:
Thanks to the issue of Credit Suisse Real Estate LogisticPlus in fall 2022, the fund received CHF 108 million. A large part of this sum was invested in a piece of industrial real estate in Unterkulm in Aargau. The tenant is the faucet manufacturer KWC, which has concluded a rental agreement for 25 years. The expected gross yield is 4.1%.
An excellent network and many years of experience are required to seize attractive investment opportunities in this dry market segment. Investors looking for opportunities like these in logistics real estate should therefore also pay attention to the value of networks and partnerships. Having an established portfolio management team is beneficial when competing for first-rate logistics investments, because its members are connected to numerous providers through their networks. Ultimately, like all forms of real estate, logistics real estate is a personal business.
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1Growth from Knowledge
2"Sleeping giant" (raum-und-mehr.com – article in German)
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