The strong decline of the economic climate continues to weigh heavily on the Logistics sector. This last downfall, mainly due to a dip in consumption is linked to rising unemployment and the effects of austerity policies. Therefore, after 1993 and 2012, 2013 will see the 3rd drop in household spending since 1949. According to the INSEE index, French economic activity could, nevertheless, experience a brighter spell at the end of the year, with a smaller drop in investments in companies and a stabilization of the manufacturing output, linked to a rise in exports and stock replenishment.
With only 765,000 sq. m. let or sold to occupiers in France in the 1st half of 2013, take-up is 18% lower than a year ago and 29% lower than in the 1st half of 2011. This poor performance is above all seen in the Paris and Lyon regions in which take-up has barely reached 260,000 sq. m. ; a fall of 54% in one year, due to the lack of any big deals and a general decline in the number of transactions.
Cushman & Wakefield’s Head of Industrial & Logistics in France, Jean-Paul Deheeger, said “The Lille market is the only one of the four main North-South axis markets to experience a positive growth (of 8%), which is accounted for by the arrival of LIDL at La Chapelle d’Armentières and the weak performance of activity at the start of 2012. Markets located outside of this axis have, however, been able to pull out of the weakened situation thanks to some large industrial projects (e.g. DSC near Nantes) or national big names in the retail distribution sector (e.g. Intermarché near Béziers)”.
Other markets have been occasionally revived by opportunistic actions on the part of occupiers, taking advantage of the already available buildings- new or second hand- to reduce their real estate at a lower cost (Massa or Dachser in Bourgogne, Noz in Aveyron). These buildings have played an important part in the take-up in the 1st half of 2013.
“The coming months should instead be marked by the concretization of multiple big turnkey schemes, as much in the Parisian region (Toys ‘R’Us, C&A) as in the Provinces (Intermarché near Rennes, LIDL near Metz, Leclerc near Châlons-en- Champagne). These projects will confirm the key role of in-house logisticians in the retail distribution sector (making up 78% of the volume of transactions since January) and should stop the drop in take-up for the rest of 2013”, explains Jean-Paul Deheeger.
Prime rent in the Ile-de-France region is at 52 €/ sq. m./ year; remaining stable from quarter to quarter. Rents have not changed in the main markets of the North-South axis. This stability in headline market values masks a more important appeal to landlords to use incentives in order to limit vacancy in their premises.
Logistic warehouses have made up 12% of the total amount invested in France in Q1, 2013 (748 million Euros). This volume is a vast improvement compared to Q1, 2012, (increase of 160%), but 13% less than Q2, 2012 which saw the acquisition of 3 logistic portfolios by Blackstone and Segro, totaling close to 600 million Euros.
Transactions of portfolios containing logistic warehouses remain the driving force of activity. Hence the joint-venture formed between Prologis and NBIM and the transfer of 370,000 sq. m. of warehouses from Icade to Apollo Real Estate account for 56% of the amount invested in logistics since the start of 2013. Other deals have been relatively few, the most significant of which have attracted investors for new and secured platforms, located at the heart of the North-South axis (Norbert Dentressangle in Coudray-Montceaux, Darty in Pusignan, Maisons du Monde in Saint-Martin-de-Crau).
Prime Yield of the best assets has remained stable from year to year. The prime rates of large warehouses are between 7.25% and 7.5% in the Paris and Lyon regions, and around 7.5% in Marseille and Lille.