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A dynamic third quarter for Logistics real estate market in France

1,685,000 sq. m. have been let or sold to occupiers since the beginning of 2013 in France. This figure is 26% more than that of the same period in 2012 yet equal to the level two years earlier.

Jean-Paul Deheeger, Head of Industrial & Logistics, Cushman & Wakefield France, said “Even though the number of transactions remains fairly low, take-up in Q3 has risen dramatically and is even slightly higher than the level seen over the entire first half. Playing a decisive role in the revival of the lettings market, several large turnkey deals have already been finalized. Nine transactions above 40,000 sq. m. (of which 7 were in the 3rd quarter) make up in total 30% of the take up for the first nine months of 2013”.

Whilst logistics providers were more active in the 3rd quarter, in-house logisticians accounted for the most significant activity and make up 72% of total take up since the beginning of 2013. “The role of large food distribution and specialist retailers remains decisive, with several significant schemes such as the launch of the Toys ‘R’ Us platform in Saint-Fargeau-Ponthierry and Leclerc near Châlons-en-Champagne”, explained Jean-Paul Deheeger. Involved in a wide scale streamlining operation, Intermarché is increasing its number of projects with a new base in Heudebouville, near Rouen, following on from the one in Béziers at the beginning of the year and those planned for the south west and Brittany.

Some of these projects are responsible for the increase in take-up in secondary poles. The four main urban areas along the north-south axis have seen their proportion fall (58% compared to 73% across the whole of 2012) reflecting the lackluster market in Lyon (120,000 sq. m. let or sold to occupiers) and in Paris (420,000 sq. m.) despite the slight bouncing back of the Ile-de-France market over the course of the last few months. Things remain stable in the Lille region (220,000 sq. m.) where the installations of Gifi near Douai and Lidl in La Chapelle d’Armentières make up over a half of total take up. Illustrating the rapid development of the Saint-Martin-de-Crau market, the new large-scale Castorama base has also generally contributed to the increase in demand in the Marseille region (224,000 sq. m.).

At 52 €/sq. m./year, prime rent in the Île-de-France region remains stable year on year. Rental values have also not changed in the other main markets along the north-south axis. The overriding need of tenants to lower property costs continued to dictate negotiation terms with landlords. Anxious to keep their assets occupied, landlords have granted significant incentives. Departing yet further from economic values, incentives have remained the condition for general stability of headline rents.

The industrial sector makes up 10% of the total amount invested in France at 1 billion Euros, 5% higher than that of the same period last year. The logistics sector makes up 85% of industrial commitments.
After the disposal of large logistics portfolios in the 1st half (Icade handover to Apollo Real Estate of 370,000 sq. m. of warehouse space), the 3rd quarter of 2013 was quieter, with activity mainly demonstrated by Blackstone’s acquisition of the Quartz portfolio for 38 million Euros, showing that the market continues to benefit from the return of opportunistic investors, particularly British and American funds, who are in search of higher returns. This deal also shows the key role played by portfolios, which make up 54% of the total activity seen since the beginning of 2013. Beyond the Quartz portfolio, two significant transactions have boosted the French market over the course of the last few months: the sale of the Eurostore site in Gennevilliers to AXA Real Estate – illustrating the interest shown by the increase in value of well-located existing properties in Paris’s inner suburbs – and the acquisition of a platform delivered in 2007 near Bordeaux by Amundi and since let to Cdiscount.
Prime rates for large warehouses range between 7.25% and 7.50% in Lyon and the Paris region and around 7.50% in Marseille and Lille. Whilst yields for the best assets have remained the same from one year to the next, occasionally they have seen a fall in the Lyon and Paris markets.