Global Investor Demand and Rents Recovering for Industrial Property
Industrial markets across the globe are now in recovery mode, albeit at very different stages, with Asia leading the rental recovery according to a new CBRE MarketView. All regions witnessed increases in investment spend in the first half of 2010, with appetite strongest across Europe, the Middle East and Africa (EMEA), where industrial sales increased by 90% on 2009 levels, with this pace set to continue into 2011.
CBRE’s first global analysis of both the occupational and investor aspects of the industrial logistics sector, shows that Tokyo has emerged as the most expensive location in the world for distribution/logistics centres, followed by London and Sao Paulo in Brazil.
Richard Holberton, Director of EMEA Research, CBRE, said: “Once the path to recovery becomes more robust across EMEA, demand for prime industrial and logistics properties will increase throughout Europe. Overall rents across the region are expected to fall by -2.2% in 2010, albeit easing to 0.6% in 2011. In line with the anticipated constraint on prime flexible accommodation for modern industrial and logistics companies in the medium term, rents could increase up by 2% moving into 2012.”
“The contraction in demand for industrial and logistics properties in 2008 and 2009 led to a more than 10% decline in our Global Rent Index, bringing rents back to 2003-2005 levels,” said Raymond Torto, CBRE’s Global Chief Economist. “The US and EMEA had the most significant reduction in rents during the period, with declines of 14% and 12%, respectively, while the Pacific Region and Asia weathered the storm better with rental declines of 5% in both regions.”
The decline in industrial rents eased throughout EMEA, the Americas and the Pacific region in 2Q 2010. Rent growth is now well underway across Asia, with rents having increased by over 6% since the end of 2009.
Torto added: “Given the strengthening demand and production levels in the world’s emerging markets we anticipate that global industrial rents for prime logistics properties will stabilise and gradually begin to increase before year-end.”
CBRE’s Global Industrial MarketView presents an econometrically based forecast of modest annual rental growth of 0.8% in Q4 2010, and expects the bottoming out of rents in EMEA and the Americas will lead to stronger global rental growth of 1.5% in 2011. Contraction in the availability of suitable properties in prime locations along with a global strengthening in consumer spending should lead to rental growth of 2.9% in 2012, according to CBRE report’s projections.
CBRE’s analysis covers 55 of the leading industrial and logistics markets across the world. It shows that, as of 2Q 2010, Tokyo was the most expensive industrial market with an average rental of US$22/sq ft, followed by London (US$19.51/sq ft), Sao Paulo (US$13.01/sq ft) and Singapore (US$11.37/sq ft).