SECTOR REPORT INDUSTRIAL AND LOGISTICS MARKET

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1 SECTOR REPORT INDUSTRIAL AND LOGISTICS MARKET UPDATE AUTUMN

2 16 INDUSTRIAL AND COMMERCIAL PROPERTY MARKET DEMAND Users of industrial and commercial property are becoming more demanding in terms of real estate: users are focusing more on efficiency and functionality. This is reflected in an increasing desire for customization (built-to-suit) and flexible concepts within industrial spaces. Demand for small-scale industrial spaces/multi-user buildings is on the rise: this is because the number of smaller companies and self-employed professionals is increasing. However, the supply of high-quality, smaller business units continues to lag behind the fast-growing demand. The number of owner-occupiers is increasing: due to the low interest rates, it is attractive to buy a commercial property and be the owner as well as the user. SUPPLY The supply of high-quality industrial space has fallen: for example, commercial property with headroom and high quality, sustainable systems. As a result, there are fewer incentives. The stock of industrial and commercial property has stabilized: new construction consists mainly of large, modern buildings and dated properties are standing empty longer because they no longer comply with current sustainability requirements. Some of these dated properties have been removed from the market by demolition. PRICE Rental prices for commercial property are increasing slightly: this is linked to the dwindling stock of highquality properties and sustained demand. Highly regional market: a decrease in initial yields is only observable at specific industrial estates in the vicinity of the big cities. The extent of that decrease is very much determined by the location. Light Industrial attractive to investors: generally speaking, initial yields are falling less quickly than in the logistics market. Light Industrial real estate in the valueadd segment is popular with investors. VISION AND EXPECTATIONS Revitalization and conversion: older commercial premises in inner city areas are being converted or configured as creative incubators. There is a lot of revitalization of industrial estates taking place, often involving repurposing. For example, gyms are increasingly being located in industrial buildings, where this change in use is technically feasible. Pushing sustainability higher up the agenda: sustainability standards have only been upgraded to a limited extent in the industrial and commercial property market. From 2023, offices are required to have at least energy label C. This applies to buildings in which at least 50% of the surface area is used for an office function.

3 17 TAKE-UP OF INDUSTRIAL SPACE (QUARTERLY) SUPPLY OF INDUSTRIAL & LOGISTICS SPACE (QUARTERLY) RENTAL RATES OF INDUSTRIAL UNITS INVESTMENT VOLUME (EUR) INDUSTRIAL SPACE

4 18 LOGISTICS MARKET DEMAND Demand for logistics real estate has increased sharply: more and more rental transactions are taking place in the logistics sector and also increasingly involve sale-and-leaseback structures. Within the portion of the market related to E-commerce, more than 80% of transactions are rental transactions. More speculative building: due to the high demand for logistics real estate in the market and the limited stock of suitable logistics property, more and more investors are building at their own expense and risk. This is particularly significant in the Schiphol region. The demand for logistics space is rapidly shifting to secondary locations. Formerly secondary locations (such as Nieuwegein, Hoofddorp, and Born) are developing into new hotspots. SUPPLY Existing logistics real estate is fast becoming obsolete: the sector is characterized by highly dynamic technological and other developments. Many companies favour new distribution centres because they can optimize specifications and efficiency there. Transformation: for outdated logistics real estate, conversion to Light Industrial may be attractive. Increase in the stock of logistics real estate due to new build developments: logistics real estate remains an increasingly attractive investment for investors and developers. PRICE Rental prices are rising slightly in the south of the Netherlands, due to the limited supply, high demand, and the high quality of new distribution centres. There will be a slight fall in rental prices in regions with an increasing supply (such as the Schiphol region). Initial yields falling slightly, particularly at logistics hotspots such as the Utrecht-Nieuwegein region. At secondary locations, initial yields are stable. Construction costs have risen: the increase is due to a shortage of staff and higher wage costs. The delivery times of materials have also increased. This is having a negative impact on the lead times of new build projects. Due to low interest rates and relatively low development costs, real estate development remains popular. INVESTMENTS IN LOGISTICS SECTOR RISING EXPLOSIVELY. VISION AND EXPECTATIONS Robotization: logistics users are exploring the possibilities of robotization. Within E-commerce, this is an expensive process due to the heterogeneity of products. Manual order picking remains the norm. Set against that, staff recruitment is becoming more difficult as a result of labour market shortages. Ever greater interest in sustainability: due to an increased focus on the conversion and redevelopment of brownfield sites in order to achieve sustainable use of space. More foreign investment: new foreign players continue to enter the logistics market. The Netherlands has an international reputation as a safe investment market.

5 19 TAKE-UP OF LOGISTICS SPACE (QUARTERLY) INVESTMENT VOLUME (EUR) LOGISTICS SPACE Amsterdam MARKET RENTS AND INITIAL YIELDS PRIMARY LOCATIONS Q EXPECTATIONS Prime Yield (GIY) % Prime Market Rent 55 Schiphol region Prime Yield (GIY) % Prime Market Rent 80 Rotterdam Prime Yield (GIY) % Prime Market Rent 65 Utrecht-Nieuwegein Prime Yield (GIY) 5,5-5,9% Prime Market Rent 60 Moerdijk Prime Yield (GIY) % Prime Market Rent 50 Nijmegen-Geldermalsen Prime Yield (GIY) % Prime Market Rent 40 Breda-Roosendaal Prime Yield (GIY) % Prime Market Rent Tilburg-Waalwijk Prime Yield (GIY) % Prime Market Rent Eindhoven Prime Yield (GIY) % Prime Market Rent Venlo-Venray Prime Yield (GIY) % Prime Market Rent Explanation Prospects user markets (coming 6 to 12 months) ( growth, decline, stable)

6 SERVICES A Jim Orsel Real Estate Agent jim.orsel@colliers.com CM Bart Oerlemans Senior Consultant bart.oerlemans@colliers.com V Marsja Hoogvorst Associate Director Valuations Commercial marsje.hoogvorst@colliers.com AS Joost Vooijs Partner Director Asset Services joost.vooijs@colliers.com AS René Mol Partner Head of EMEA REMS rene.mol@colliers.com AD Frans Merks Head of Development frans.merks@colliers.com R Bart Stek Head of Research bart.stek@colliers.com OC René Annen Consultant rene.annen@colliers.com A AGENGY CM CAPITAL MARKETS V VALUATIONS AS ASSET SERVICES AD ASSET DEVELOPMENT R RESEARCH OC OCCUPIER SERVICES, Amsterdam 2017 Except for the exceptions stipulated in or pursuant to Dutch copyright law, none of the contents of this publication may be reproduced by way of printing, photocopies, automated data files, the internet or in any manner whatsoever without the prior written consent of Nederland. The authors have made every effort to ensure that the publication is as reliable as possible. Nevertheless, they cannot accept any liability for any inaccuracies that may appear in it.