As was the case in 2013, the rental activity of the French logistics real estate market began slowly in 2014.
Jean-Paul Deheeger, Head of Industrial & Logistics, Cushman & Wakefield France, said “In Q1, only 390,000 sq. m. of warehouses > 5,000 sq. m. were let or sold in France, representing a yoy decrease of just 7% but a sharp decline of 34% in comparison with the same period in 2012”.
27 transactions were recorded in the whole of France, 12 of which in the Paris region. The very limited number of transactions affects the overall level of take-up. It equally places importance on several large transactions: of which four were > 30,000 sq. m. and accounted for 44% of total take-up.
However, the most significant transactions of the year are yet to come. Large distribution retailers (Leclerc, Intermarché, Carrefour, etc.) are continuing to streamline their operations with the development of large and modern buildings. Once completed, these projects will further boost take-up. Not taken into account in Q1 2014 figures, the absence of these projects explains the temporary decline in the share of secondary markets in total take-up.
Ile-de-France’s share is, however, increasing significantly. 205,000 sq. m. were let or sold in the Paris region in Q1 2014, representing 53% of total take-up in France (37% in the same period of 2013).
Jean-Paul Deheeger explained “After a slow year in 2013, this pick up is primarily due to the long-awaited completion of two large turnkey projects: Toys R’ Us in Saint-Fargeau-Ponthierry and C&A close to Meaux. These two operations and Carrefour’s leasing of a 36,800 sq. m. site in Moussy-le-neuf account for almost 60% of all rental activity in the Ile-de-France region in Q1”.
They also explain the significant impact of grade A buildings on total take-up. The remaining activity in the Paris region consisted primarily of leasing existing buildings between 6,000 and 12,000 sq. m. in size (SDLT in Servon, Schenker in Mitry-Mory).
Other areas along the North-South route were less animated. Overall only six transactions were recorded in the regions of Lille, Lyon and Marseille. However, in these last two areas, take-up is soon to be boosted by the completion of large turnkeys for in-house logisticians and by renewed demand from logistics providers.
Recently vacated buildings continue to increase the available supply. However despite this, the most recent transactions have further reduced grade A supply, particularly in Lyon and the north of the Ile-de-France. Quality supply is therefore becoming increasingly scarce, forecasting a recovery – albeit limited – of speculative developments.
Almost €200 million was invested in the French industrial real estate market in Q1 2014, of which €130.4 million (66%) was invested in the logistics sector. This last figure is considerably smaller than that of Q1 2013 (€439 million), although at that time volumes were boosted by the joint venture of Prologis and NBIM for €272 million. The mediocre performance in Q1 2014 is explained by a lack of sales of warehouse portfolios and by a very limited number of transactions. Since the beginning of the year, transactions have focused primarily on assets of less than €50 million, for example Prologis’ acquisition of a site let to Norbert Dentressangle in L’Isle d’Abeau or the sale to Argan of a warehouse close to Saint-Étienne previously let to Casino.
Ongoing transactions, such as the sale to Blackstone of Foncière des Régions’ portfolio for close to €350 million, forecast a sharp increase in investment volumes in the coming months. The anticipated acceleration of activity shows that the logistics market continues to benefit from investors’ high demand for large new or recent platforms situated in France’s four major hubs and from the interest shown by more opportunistic players for Class B assets.
Prime yields for large warehouses sit between 7.00% and 7.25% in Paris, Lyon, Marseille and Lille. Despite generally stable yields in the rest of the country, they could begin to show a new downward trend in the four major markets along the north-south corridor thanks to the scarce supply of quality assets on sale.