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European industrial real estate investment at a four year high in 2011

Full-year industrial transaction volumes hit nearly €10 billion, topped only by the boom years of 2006 and 2007, according to Jones Lang LaSalle research.

Full-year industrial transaction volumes hit nearly €10 billion, topped only by the boom years of 2006 and 2007, according to Jones Lang LaSalle research.

  • Full year volumes hit €9.9 billion, up 18% year on year
  • UK, France and Germany markets account for €6 billion of total volume
  • CEE volumes grow 156% to €630 million
  • However, industrial investment in Russia decreased due to some of the deals slipped over to 2012
  • Global investment volumes reach 38%, higher than previous peak in 2005 

London-Moscow, 11 March 2012 – European industrial investment activity continued to accelerate in the final quarter of last year, when approximately €3 billion of transactions took place, the highest quarterly volume since the final quarter of 2007.As a result, full-year volumes totalled €9.9 billion, up 18% year-on-year, marking the third largest annual transaction volume on record, topped only by the boom years of 2006 and 2007.

“Final figures show that, despite the numerous economic headwinds, European industrial assets continue to attract significant interest. Notably, we see increasing demand from a growing range of investors targeting the sector, in particular global players seeking larger portfolio logistic deals in Europe” comments Penny Hacking, Director, Jones Lang LaSalle European Industrial Capital Markets.

Industrial transaction activity across the region remained uneven. The UK, Germany and France continued to be the most traded markets, accounting for over €6 billion, more than 60% of total full-year volume. Investment activity intensified throughout the second half of the year as investors targeted markets with large pools of trade-able assets perceived as a “safe haven”. Significant competition for limited core assets within the three main country markets also benefited neighbouring Benelux, where volumes increased by 126% in the full year to €820 million. See diagram 1.

The healthiest annual growth was recorded in the core Central European (CEE) markets, including Czech Republic, Hungary, Poland and Slovakia. Transaction volumes reached €630 million, 156% ahead of 2010. As a result, with 6% of the European total, capital invested in CEE industrial assets reached its highest share to date. While final figures were significantly skewed by two large portfolio deals in the Czech Republic which accounted for almost 54% of the CEE total, it nevertheless reflects the continued investor appetite in the region.

Elsewhere, volumes contracted in Russia, down almost 25% with a total of $450 million against more than $600 million in 2010 (€350 m and €470 m). See diagram 2.

Andrey Postnikov, Executive Board Member, Regional Director, Capital Markets, Jones Lang LaSalle, Russia & CIS, commented: “The 2011 volumes reduction was primarily due to some of the deals slipped over to 2012 as well as low interest to the sector from local capital. At the same time we are positively looking forward to 2012, expecting 1-2 very sizable investment transactions and variety of investments into the sector. We believe 2012 industrial investment should well exceed the year 2010.”

Cross border volumes dominated 2011 with a total of €6.5 billion of cross-border transactions recorded, reflecting 65% of the European total – notably up from 34% in 2010. The significant jump was largely driven by a strong increase in capital sourced internationally and structural changes in the logistics market leading to a maturing institutional industrial market.

International investment reached 38% of the European total in 2011, significantly up from 13% in 2010 and its last peak in 2005 (30%). More than half of this capital was invested in the UK, followed by Germany with 17%. “However, investments by international investors elsewhere in Europe, including destinations such as Russia, Italy and Spain, highlight the strong attraction of modern distribution assets let to prominent covenants on a longer-term lease base in markets with a higher growth potential over the medium term” adds Penny Hacking.

Alexandra Tornow, Jones Lang LaSalle EMEA Industrial and Logistics Research, summarized: “Nevertheless, we expect that industrial investment activity is likely to remain in line with last year’s level, driven primarily by attractive income returns, although downside risks from the Eurozone sovereign debt crisis could have a substantial effect on transaction activity.”

About Jones Lang LaSalle

Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 195 million square meters worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47.7 billion of assets under management.

In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Almaty. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010 and 2011 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.
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