the logistics and light industrial space in france

Transcription

CB RICHARD ELLIS
ANNUAL REPORT
THE LOGISTICS
AND LIGHT INDUSTRIAL SPACE
IN FRANCE
2009
Investments France - Offices Paris Region - Regions - Retail - Light Industrial / Logistics
CB RICHARD ELLIS EN FRANCE
Covers 35 metropolises in France
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Turnover 2008:
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CONTACTS
LOGISTICS AND LIGHT INDUSTRIAL SPACE
Didier MALHERBE
Tél.: 33 (0) 1 53 64 36 30
Fax: 33 (0) 1 53 64 30 02
[email protected]
RESEARCH
Aurélie LEMOINE
Tel.: 33 (0) 1 53 64 36 35
Fax: 33 (0) 1 53 64 40 00
[email protected]
Text completed on 15th September 2009 by the CB Richard Ellis Research department. Written by: Erika Léonard
CB Richard Ellis Ressources - Economic Interest Group - Head Office: 145-151, rue de Courcelles 75017 Paris - Siren 412 352 817 - RCS Paris
Reproduction of all or part of this document is authorized on express condition that the source be credited.
Although information published in this overview has been obtained from reliable sources, CB Richard Ellis or the CB Richard Ellis Group can on no account be held responsible for its accuracy.
1
GENERAL CONTEXT
2
LOGISTICS IN EUROPE
4
LOGISTICS EN FRANCE
11
THEMATIC ZOOMS & INTERVIEWS
15
LIGHT INDUSTRIAL SPACE AND WAREHOUSES < 10,000 SQ. M IN ILE-DE-FRANCE
19
INVESTMENTS
GLOSSARY
Immediate supply
Possible development
The amount of space that is currently vacant and available to let or for sale.
A credible potential project for which some administrative procedures are still to
be fulfilled or are pending approval.
Industrial park
Semi-speculative development
An enclosed area with a clearly defined boundary. The owners and/or occupiers
in the zone have a «community of interests». The main features of an industrial
park are: a minimum of 8 units, minimum 3,000 sq. m, and the existence of a
community of interests (shared services or equipment). Several types of zones exist:
industrial parks in which the share of office space is equal or inferior to 35% of
total space; office and industrial parks where the share of office space exceeds
35% and logistics parks where the share of warehousing exceeds 80%.
A development project for which all procedures prior to construction have been
carried out for example the site purchased, preparatory studies made, project
defined, and planning approval fully granted as are any other administrative
authorisations. Only the actual construction remains and this considerably
reduces the time needed before the occupier can move into the new premises
as works are ready to start.
Light industrial space
Speculative development
A building or part of a building with a ground floor of a headroom exceeding
4 metres and ground level or loading bay access. The main function of light
industrial space is to accommodate manufacturing activities, small assembly
lines, small-scale distribution and/or storage. Such premises enable all the
functions of a company to be housed under the same roof. Typical specifications
of light industrial space are: inferior or equal to 35% of space used for offices,
floor-to-ceiling height at least 4 metres in manufacturing zones, direct lorry access
to manufacturing and storage areas, ground floor or loading bay access, and
load bearing capacity of 1 ton per square metre.
Logistics
The management of the flow of goods for a third party. The main activities in
logistics are transport and storage, but may also include wrapping, labelling,
product dispatching, traceability, and assembly.
Mixed office and light industrial space
A building or individual units with at least 35% office space that can be
exploited vertically or horizontally for light industrial (non office) uses such as
laboratories, research centres, small production or assembly processes etc. The
main specifications of such buildings are a floor-to-ceiling height under 4 metres
with more than 35% of office space.
Own-account development
A development undertaken for the company that will occupy the building that
may or may not own the land.
© 2009 CB Richard Ellis
THE LOGISTICS AND LIGHT INDUSTRIAL SPACE IN FRANCE
SOMMAIRE
A building development, to let or sold, that is constructed without any occupier(s)
committing to take space in it.
Specific light industrial space
A building that does not correspond to standard definitions of a warehouse, or
light industrial space or mixed office and light industrial space because of its size
and/or technical features (designed for a specific function, e.g. a factory).
Take-up
The totality of transactions to let or sell carried out by occupiers, including turnkey
schemes in a given period.
Transloading
Stage in the transport of goods involving the transfer of goods, either
immediately or after a period of storage, from one lorry to another. Transloading
is costly because it implies immobilising lorries for a period of time.
Warehouse
A building that is principally used to accommodate a distribution activity, storage
and/or dispatch of goods activity. The main characteristics of a warehouse are
a floor-to-ceiling height of at least 5.50 metres, homogeneous space and
volumes, regular shapes and heights, multiple loading bays, perhaps some
office space, a manoeuvring area at least 20 metres deep, and load bearing
of at least 3 tons per square metre. Warehouses with operating approval and
a floor area above 10,000 sq. m are considered as logistics buildings.
1
THE MARKET FOR INDUSTRIAL SPACE IN EUROPE
WORLDWIDE GROWTH IN GDP AND TRADE FLOWS
(In volume, base 100 = 1989)
The economic downturn impacts the letting market
With production down 1.8%, 2008 was a particularly difficult year
for industry in the European Union, though the fall was less brutal than
it was in the United States and Japan. Production in most of Europe’s
major powers fell sharply; for example in Spain it fell by 7.3%, in the
United Kingdom by 3.4%, Italy 3.3% and France 2.6%. The world’s
largest exporter, Germany, resisted the crisis better. In mid-2009,
surveys of European industrialists revealed that the business climate
was still very weak. Yet there was a slight improvement in order
books and stocks were at a lower level.
The growth rate of imports and exports fell significantly in Europe
and the trade deficit of the European Union deepened by 25% in
2008 to 241.3 billion euros. Foreign trade deficits for the United
Kingdom, Spain and France were particularly poor. Two factors
aggravating the situation were the strong euro and the slowdown in
world demand.
350
300
250
200
150
100
50
89
92
95
98
01
Trade index
04
07
10 (f)
GDP index
Source: IMF
Against this backdrop, road transportation (in tonnes per kilometre),
which accounts for 80% of goods transported in Europe, fell by
approximately 2% in 2008*.
The letting market shrinks
As a direct consequence of negative growth, demand for industrial
space shrank in Europe, with occupiers generally preferring to put off
real estate projects or renegotiate on-going leases. Demand is fuelled
solely by companies looking to reduce costs and rationalise space
use. In this difficult economic climate, developers have virtually stopped
all speculative developments and are willing only to propose turnkey
solutions to occupiers. Rents have started falling or are on the brink of
doing so, a decline that is expected to continue in the months ahead.
World trade has risen by almost 300% since 1990, at
the same time world GDP grew by 87%. This increase
illustrates the profound change that has taken place in
industry and trade in general (opening of markets,
restructuring of industrial capacities, economic
development).
Nevertheless, there are factors that will work in favour of a gradual
improvement in the market. Many premises are out-dated: these are
a burden to productivity, creating a widespread need for
modernisation.
* Trend based on 20 European countries.
2
- 2%
90
- 4%
85
- 6%
Index (base 100 = March 2000)
June-09
95
Sept-08
0%
Dec-07
100
March-07
2%
June-06
105
Sept-05
4%
Dec-04
6%
110
March-04
115
June-03
8%
Sept-02
Owners of existing industrial facilities, generally speaking second hand
ones, are willing to rent them even under very short leases, for
example 6-12 months, to reduce the amount of vacant space in their
property.
120
Dec-01
In Germany market activity followed general trends and slowed down.
Headline rents were actually quite stable, but occupiers are taking
longer to make decisions and are playing a waiting game.
Optimising site allows, amongst other things, occupiers to sublet
space. The other trend is one of grouping operations on a single site.
VARIATION IN AVERAGE INDUSTRIAL RENT INDEXES OF THE EU-27
March-01
During depressed periods there is a tendency in some countries for
distribution centres to be concentrated around major population
centres. But in other countries, new communication hubs have
continued to emerge, even in very mature markets such as the
Netherlands, Germany and Spain. Logistics specialists are still
establishing their networks in Europe and wish to expand their
networks in promising markets.
Annual change
Index EU-27 is calculated using prime rental values from the European Union’s largest cities.
Source: CB Richard Ellis
In Poland, although the warehouse market is still expanding it has
suffered from the troubled economy. Take-up was significantly lower
than at the same period last year, but still remained at a decent level,
mainly due to an active 2nd quarter, which arouses some hope for the
months ahead.
Despite a sharp reduction in the amount of speculative development,
there is a plentiful supply of new space and takers are hard to find.
Consequently, the vacancy rate has risen to the particularly high figure
of 19%.
On average rents are stable. However in some over-supplied
submarkets, there can be a difference of up to 30% between asking
rents and the rents finally agreed, further reduced by commercial
concessions. Developers have started adjusting asking values in an
attempt to find occupiers rapidly for recently completed buildings.
SPREAD OF RENTAL VALUES FOR INDUSTRIAL SPACE
(In € net/sq. m pa, change compared with 2nd quarter 2008)
Germany
€54 / 77
=
Belgium
€43 / 58
Spain
€36 / 102
France
€33 / 125
€102
Italy
€58 / 61
Netherlands
€65 / 70
Poland
€48 / 72
Portugal
€46 / 51
Czech Republic
€54 / 60
United Kingdom
€61 / 148
Russia
€79 / 91
Ireland
These are prime rents in all markets covered by CB Richard Ellis for industrial premises
(warehouses and light industrial sites), for all size brackets.
TRENDS IN INVESTMENTS FOR LIGHT INDUSTRIAL SPACE IN EUROPE
(In million euros)
25,000
The United Kingdom has not been spared the drop in market activity.
Take-up in the southeast was at a reasonable level, which kept rents
stable, particularly for good programmes, albeit with a few
concessions granted in leases.
In most other markets where there is more supply, take-up can no
longer absorb supply.
In order to secure their assets’ with tenants, owners are lowering rents
significantly and/or including other commercial incentives in the
leases in exchange for long fixed-term leases (longer than six years).
In Italy, the decline in both market values and take-up has dissuaded
developers from building speculatively. They prefer to ensure their
investments are secure by pre-lettings and turnkey schemes. Prime
rents are relatively stable despite increasing downward pressure.
Yet companies still need to optimise and rationalise space use, which
is generating demand for large good quality units that provide
efficient and flexible space. In a position of force, occupiers are
aggressive during negotiations and rents are thus expected to fall.
The Spanish market for small premises has ground to a halt. Over the
last few years this segment has been essentially composed of
companies looking to acquire premises, a market that has been
stopped by the credit crunch. Selling prices fell sharply in line with the
drop in land prices (down 30% to 40% in the Madrid area). Rents
have also fallen, but to a much lesser extent. The supply of available
space has risen and demand has shrunk as companies shut down
sites and/or reduced the amount of space occupied.
For large sites, the drop in land prices has created opportunities for
owners and occupiers alike. Although take-up has fallen, it is still
considered to be at a reasonable level. Occupiers are putting a lot
of pressure on owners to obtain better financial conditions in leases.
20,000
For building sites earmarked for industrial development, owners are no
longer willing to start building speculatively. Instead they look for
occupiers willing to take long leases of 7 to 10 years. But such tenants
are difficult to find since occupiers themselves are restricted by the
state of their order books and tend to look for shorter term, more
flexible leases. Take-up is currently more active for small units. The
vacancy rate for premises above 10,000 sq. m is expected to rise in
the short term.
15,000
10,000
5,000
03
04
05
06
07
08
H1 09
I NVESTMENTS
COLLAPSE
BUT THERE IS SOME HOPE FOR AN UPTURN
The investment market fell sharply throughout Europe. However
the industrial sector has maintained its share of investment in
standard commercial real estate. It accounts for 10% of volume
invested in the 1st half of 2009.
Since the start of the year, the United Kingdom has attracted most
investment activity – approximately 40% of investment – mainly
due to the good yields on offer for secure products and a
substantial wave of repricing.
The market for industrial space offers high yields which are less
closely linked to rents than other products. Moreover, some
developers are forced to sell to improve their liquidity. These forced
sales provide good opportunities for other players that wish to get
a foothold in the market. In addition, some funds exist that are
still available for investment before the end of the year.
The letting market also has some strengths that should play in
favour of an improvement in investment. Despite the fact that
companies are looking to cut costs, there is a real need for modern
flexible premises. The drop in rents will create opportunities for
demand in some countries. Combined, these factors point to a
slight improvement in performance for the 2nd half of 2009.
3
LOGISTICS IN FRANCE
Although the logistics market has been relatively resilient to the effects
TRENDS IN LOGISTICS TAKE-UP IN FRANCE
(In million sq. m)
of the economic and financial crisis – only a short while ago forecasts
3.0
were not too alarming – the sector has finally succumbed, following the
2.5
course of other property asset classes. The slowdown in the economy
and the uncertainty plaguing economic players have got the upper
2.0
hand and, although they have not caused a total meltdown, are
1.5
undermining the market.
1.0
Take-up points down
0.5
In France, in the first six months of 2009, take-up of logistics space
00
01
shrank by 31% compared to the 1st half of 2008 to 900,700 sq. m.
Note that the first three months of the year were particularly active,
with a high level of take-up given the circumstances, suggesting the
market had been spared the crisis. Only in the 2nd quarter did the
market really begin to flag. There were several contributing factors:
02
03
04
05
Take-up
06
07
08 H1 09
Estimate year end
TAKE-UP BY FLOOR AREA BRACKET IN FRANCE AT 1ST HALF 2009
> 50,000 sq. m
14%
10,000 - 20,000 sq. m
35%
• to begin with, on a nationwide scale several large transactions were
completed in the 1st quarter that had taken several months to be
processed; some were even initiated at the start of 2008 or earlier;
• major players in the economy, anticipating a drop in
consumption, will reduce their stock levels thereby triggering a fall
in the amount of space needed;
20,000 - 50,000 sq. m
51%
• with the economy in recession and the international climate
uncertain, occupiers and owners alike are putting decisions on
hold and are proving to be very cautious when proceeding with
lease negotiations. For example, there was a growing trend in the
1st half to renegotiate on-going leases. Subsequently, despite the
fact that many requirements for space are received, few actually
result in new leases being signed. Many occupiers appear to be
launching tenders simply to have price comparisons but they do not
systematically result in;
• the above trend has led to prolonged lead times from the initial
GEOGRAPHIC BREAKDOWN OF TAKE-UP AT 1ST HALF 2009
Greater Southwest
2%
West
4%
Centre
4%
Normandie
4%
Greater East
6%
Greater North
16%
Greater South
16%
Rhône corridor
24%
Paris region
24%
property search to the final decision, which inevitably slows down
letting and sale rates;
• the need to reduce operating costs involves the reduction of real
estate overheads (one of the largest cost centres), which leads to
two types of behaviour. One is that occupiers may decide to
C ONSIGNOR
Industrialist or major retailer that organises goods and
puts them in a form of transport. This term also
designates the shipper of the goods. In shipping the
consignor is the charterer.
rationalise their logistics space, causing a fall in transaction
volumes at the expense of large units. The other is that they may
decide to pool their needs with other companies and create large
L OGISTICIAN
logistics platforms. The first option is the one that has been widely
Organiser and manager whose role is to optimise the
movement or storage of raw materials or manufactured
goods to reduce the costs of these movements to a
minimum. Logisticians manage the circulation of goods
whatever the client company’s field of activity. They
therefore work for industrialists, carriers or in mass
retailing.
adopted, leading to a fall in the number of giant transactions
(> 50,000 sq. m), a market that had already shrunk in 2008, in
contrast to 2007 when large demands had fuelled the market. This
explains the large share of consignors in take-up compared to
that of logisticians.
4
TRENDS IN LOGISTICS IMMEDIATE SUPPLY IN FRANCE
take-up to the benefit of regions to the north of France and the Rhône
(In million sq. m)
corridor. In a reversal of this trend in 1st half 2009, the Paris region
3.0
took the lead again in the volume of transactions, drawing equal
2.5
with the Rhône corridor and ahead of the north. Yet the north/south
2.0
axis has remained the pivot for logistics transactions – 80% of them.
1.5
Finally, despite an ageing stock – notably due to the lack of new
developments and the arrival of second hand space on the market
at low rents that compete with new schemes – the quality of transactions
has not really deteriorated. Indeed this may explain the relative
resistance of markets around Paris, Lyon and the south of France.
1.0
0.5
05
06
07
08
H1 09
More availability
At 1st July 2009, immediate supply in France rose to more than
2.7 million sq. m, up 17% since the start of the year. A year-on-year
leap in supply figures has left the French logistics market in a
situation of over-supply with a vacancy rate of approximately 11%.
This is particularly so in Ile-de-France and in the Rhône corridor,
IMMEDIATE SUPPLY BY FLOOR AREA BRACKET IN FRANCE AT 1ST JULY 2009
> 50,000 sq. m
14.5%
10,000 - 20,000 sq. m
37%
which together account for three-quarters of vacant space.
The sharp increase in available supply is essentially due to second
hand space being vacated and speculative schemes, initiated in
2008, finally being completed. These buildings are now on the market
and are difficult to sell or let.
In 2007 and 2008 there was a decline in the Paris region’s share of
20,000 - 50,000 sq. m
48.5%
Also worth noting is the fact that supply does not really match the
profile of demand from occupiers. With traditional letting down and
demand for turnkey operations up, out-dated premises remain
unoccupied when put back on the market, accentuating the oversupply.
Speculative supply has continued to shrink, falling to 586,100 sq. m
at 1st July, a 38% drop since 1st January 2009. Many development
projects have effectively been put on hold due to the uncertainty
surrounding future prices and rents, a fall in transactions, the
hesitancy of occupiers and the difficulty in funding. At the moment,
half of construction starts are based in the south, compared to
approximately 10% in Ile-de-France. Most completions of future
GEOGRAPHIC BREAKDOWN OF IMMEDIATE SUPPLY AT 1ST JULY 2009
West
1%
Greater Southwest
3%
Greater South
3%
Bourgogne
3%
Greater East
4%
Greater North
5%
Normandie
5%
Centre
6%
Paris region
45%
Rhône corridor
25%
buildings are scheduled for the end of the year or the start of 2010.
The development projects that have been put on hold swell the
figures for semi-speculative schemes, which as a result have risen
substantially nationwide. They accounted for almost 3.5 million sq. m
at 1st July, a record high. Most of these semi-speculative schemes
will be available in 2010 at the earliest. It is highly likely that they
will be put back until an even later date if the present situation does
not improve.
T URNKEY
SCHEME
A transaction concluded when the building is still a
project or under construction, but whose structure will be
modified to suit the needs of the occupier.
5
Rents start falling
PRIME RENTAL VALUES IN SOME LARGE FRENCH CITIES
While headline rents showed no significant movement for several
quarters, they finally started falling for large warehouses in all
regions of France. In some regions this reduction has not been very
large, but by the end of the year it will be noticeable in every sector.
In an environment where supply is rising and demand falling,
prices for any product automatically fall until a balance is found
in the market. When this point is reached, conditions will be more
conducive for a turnaround in the market and for transacting to start
up again, assuming, that is, that supply is matched to demand by
the availability of new buildings that meet standards in force.
As for commercial incentives, throughout France they are worth
approximately one month of rent-free period for each year
guaranteed in the lease. They may be even higher in some zones
where there is an abundance of supply. The effective rent paid for
large logistics platforms suffers from the current situation and has fallen
significantly since the start of the year.
(In € net /sq. m pa)
Lille
€40 / 44
Ile-de-France
€43 / 50
Strasbourg
€39 / 54
Orléans
€40 / 48
Rest of regional France
€33 / 40
Lyon
€44 / 46
Bordeaux
€38 / 43
Marseille
€44 / 50
Outlook
The logistics market in France will continue to follow these trends in
the 2nd half of 2009: volumes transacted will continue to fall (with
demand still geared to good quality space), vacancies will increase
even more but to a lesser extent, and speculative schemes will
gradually be absorbed. The only trend that is likely to be reversed
is the level of semi-speculative supply: this may start shrinking as
projects are cancelled due to the fall in consumption.
Indeed this feature may affect large distributors: if fewer products
are consumed, less storage space is needed and demand will fall.
In addition this sector has already seen a significant change in
logistics schemes where buildings are increasingly geared towards
the flow of goods to the detriment of pure storage. This could lead
to a rise in the need for cross-docking facilities, in a more urban
environment, compared to current schemes that tend to be a
long way from large conurbations and relatively far from large
population centres. In addition, the modernisation of ageing
buildings, particularly in Ile-de-France, could help remedy the
unsuitability of supply to demand. The conversion of old buildings,
which do not meet standards in force, to latest generation facilities
would help resolve the problem of over supply in some sectors.
However the financial feasibility of such conversions is unsure.
PROJECTS CHANGING THE FACE OF FRANCE
As part of the plan to rescue the French economy that
was started early 2009, the development of transport
infrastructure will be given a boost in the next few years.
Some 870 million euros of investment are planned,
including 400 million for roads, 300 million for railways
and 170 million for rivers and ports.
Two of these major projects involve increasing security
and expanding the French rail network by building more
than 900 km of high-speed lines with services starting in
the next decade.
The Canal Seine Nord Europe project (a wide canal) is
one of the landmark projects initiated at the Grenelle
environmental talks. A 106 km watercourse from
Compiègne in Oise to the Dunkerque-Escaut canal
(in Cambrai in Nord), it will open up the Seine basin,
making river transportation possible between France and
the north and east of Europe.
V ACANCY
RATE
The ratio of immediate supply of space to total stock of
space for existing warehouses or light industrial space.
SUMMARY AND TRENDS AT THE END OF 2009
RECENT TRENDS
Transactions compared to H2 08
Vacancy rate
Greater North
•
••
=
Ile-de-France
•••
•
Rhône corridor
=
•••
•
Greater South
•
•••
• Very weak
•• Average
CURRENT TRENDS
Construction starts
Short term market situation
••• High
6
ZOOM: ILE-DE-FRANCE
MAP OF THE MAIN LOGISTICS ZONES IN ILE-DE-FRANCE
Take-up on the verge of shrinking
In Ile-de-France, the conclusion in 1 half 2009 of several very large
transactions that had been in the pipeline for a long time brought the
volume of transaction up to 218,200 sq. m, a year-on-year rise of 16%.
For example, transactions included two remarkable turnkey schemes in the
Val d’Oise: Sisley for 46,000 sq. m of new space in St Ouen l’Aumône
and Manutan for 56,000 sq. m of new space in Gonesse. The market has
now slowed down and expectations are for a more sluggish 2nd half. Most
transactions involved medium-sized warehouses, between 10,000 sq. m
and 30,000 sq. m. Occupier interest was, however, quite strong during
the first six months of the year, particularly in the sector of mass distribution.
But these tenders have not yet come to fruition.
st
To conclude, by the end of 2009, the cautionary approach taken by
developers will lead to construction starts being reabsorbed and the
supply of semi-speculative space stagnating.
Market repricing
Headline rents are under pressure. They now lie in a range from €43 to
€50 net /sq. m pa.
TRENDS IN TAKE-UP AND IMMEDIATE SUPPLY IN ILE-DE-FRANCE
(In million sq. m)
1.5
Supply high and rising
In this relatively slow market in Ile-de-France, where the vacancy rate is 16%,
immediate supply totals 1,250,500 sq. m, a 16% increase in six months.
This growth is due to occupiers quitting several sites which
are then left vacant and to the completion of some speculative space.
At 1st July, the volume of speculative developments totalled only
59,100 sq. m and consisted of three schemes that can be completed before
the end of the year. The poor economic climate has been inciting developers
to reschedule the completion of speculative developments which are then
counted as semi-speculative schemes. Consequently the total amount of semispeculative schemes identified has expanded to stand at 466,200 sq. m at
1st July 2009. This trend is unlikely to continue because no other development
project is on the drawing board at the moment.
1.2
0.9
0.6
0.3
05
H1
06
07
H2
08
09
Immediate supply at period end
7
ZOOM: THE GREATER NORTH
MAP OF THE MAIN LOGISTICS ZONES IN THE GREATER NORTH*
* Excluding Picardie
Take-up levels flagging
In the north of France, take-up stood at 147,500 sq. m in the 1 half of
2009, a year-on-year drop of 62%. The collapse was mainly due to the
absence of any large transaction in Picardie. In the Nord-Pas-de-Calais, takeup was stable.
st
Transactions for the most part involved warehouses between 10,000 sq. m
and 20,000 sq. m. The majority of transactions were located in a zone
stretching from Lille then along the A1 motorway to Paris.
It is worth noting though that the market at the end of 2008 was active and
the start of 2009 slow. Occupier interest picked up in the 2nd quarter, but
occupiers are proving to be extremely cautious and the time it takes for
them to make their decisions has been stretching out. These searches have
been mostly for new premises, usually with a view to moving and as part
of a strategy to reduce real estate costs and put in place more efficient
processes.
Immediate supply still low
Available supply in the Greater North stood at 124,600 sq. m at 1st July
2009 (a 13% fall in six months), mainly composed of units from
20,000 sq. m to 50,000 sq. m. This is a low figure; the area suffers from
a lack of good quality space and the vacancy rate is only 3.1%, a shortage
particularly felt in the south of the region near Lens, Douai and Arras. Much
like other regions, at 1st July 2009 speculative space in the pipeline had
shrunk by 20% to 85,500 sq. m since 1st January, while semi-speculative
8
schemes were stable, at 799,100 sq. m. Most of the latter involve very large
developments of more than 50,000 sq. m, available in 2010 at the earliest.
Rental values set to fall
Headline rental values were stable for second hand premises, at €37 to
€41 net/sq. m pa, but down slightly for new space, at €40 to €44. These
values are expected to fall by the end of the year.
TRENDS IN TAKE-UP AND IMMEDIATE SUPPLY IN THE GREATER NORTH
(In million sq. m)
0.75
0.60
0.45
0.30
0.15
06
H1
07
H2
08
09
ZOOM: THE RHONE CORRIDOR
MAP OF THE MAIN LOGISTICS ZONES IN THE RHÔNE CORRIDOR
Transactions slide
Start of a repricing phase
Take-up stood at 220,600 sq. m in the Rhône corridor in the 1 half of
2009, a 23% fall in a year in half as many transactions. It is the French region
where the amount of take-up was the greatest over the period studied, outperforming the north, which is usually much more active. Three very large
transactions, totalling 115,800 sq. m, that were started in 2008 and only
concluded in 2009, were, however, largely to thank for the high take-up
figure. Demand from occupiers was generally geared to much smaller units
than is generally the case, in a range of 6,000 sq. m to 12,000 sq. m.
Consumption is expected to decline, which will lead companies to reduce
and rationalise their space use. In addition, a certain number of requirements
for turnkey letting schemes have been noted for occupiers that aim to settle
in the medium term. Once again, the most popular sectors are L’Isle d’Abeau,
Plaine de l’Ain and the Rocade Est.
st
Headline values are dropping and range from €35 to €38 net/sq. m pa
for used premises (without ICPE approval), from €38 to €44 for second
hand premises (with ICPE approval) and from €44 to €46 for new
space.
TRENDS IN TAKE-UP AND IMMEDIATE SUPPLY IN THE RHÔNE CORRIDOR
(In million sq. m)
0.75
0.60
0.45
High level of immediate supply
688,500 sq. m of vacant space were identified at 1st July 2009, a 33% rise in
six months. Half of this space was composed of premises between 20,000 sq. m
and 50,000 sq. m and it is generally of good quality. The vacancy rate is
approximately 11.5% so the market is clearly a occupiers’ market. Speculative
developments have virtually been absorbed, the last scheme in the pipeline
was completed at the end of the 1st half. By contrast there are many semispeculative schemes for a total of 504,700 sq. m, mainly composed of
medium-sized premises that will be completed in 2010 at the earliest.
0.30
0.15
06
H1
07
H2
08
09
9
ZOOM: THE GREATER SOUTH
MAP OF THE MAIN LOGISTICS SITES IN THE GREATER SOUTH
Take-up rises
Rents drop
In the 1 half of 2009, take-up stood at 140,200 sq. m. This reflects the
level of market activity in the region, as it is equivalent to take-up in the
north and is up 51% on figures for the same period last year. This strong
performance is due to several transactions going through that were
initiated in 2008. By contrast, the 2nd half could be weaker because very
few new transactions have got underway since the start of 2009. Most
transactions are on medium sized units; Lidl was the client on the two
biggest operations taking 40,000 sq. m in Les Arcs in the Var department
and a 38,000 sq. m unit in Béziers in the Hérault department, both new
developments. Occupier interest has principally been for large warehouses
in which they can increase the mass of the flow of goods and/or reduce
operating costs.
Headline rental values have followed a downward trend and stand
between €44 and €50 net/sq. m pa for new space.
st
Immediate supply falls
At 1st July 2009, immediate supply fell in the region, down 30% in six
months to 79,000 sq. m. The lack of availability resulting from a shortage
of sites is putting the market under pressure. Vacancy rates stood at 2.6%
at 1st July. In contrast to other regions, there is a significant amount of
speculative space in the pipeline: six schemes including two in Distriport,
totalling 288,000 sq. m. There are also many semi-speculative schemes,
for a total of 761,000 sq. m. The most ambitious developments are in Les
Arcs, Saint-Martin-de-Crau and Bollène, where they range in size from
161,000 sq. m to 216,000 sq. m, resulting from the decision of certain
consignors to concentrate their logistics platforms.
10
TRENDS IN TAKE-UP AND IMMEDIATE SUPPLY IN THE GREATER SOUTH
(In million sq. m)
0.30
0.24
0.18
0.12
0.06
06
H1
07
H2
08
09
The current economic context is forcing real estate players to
adapt to change, which in turn leads to markets being
revitalised. This may transform their structure and the way they
operate. The logistics market will not be spared.
As international trade shrinks and consumption slows down,
leading to a gradual transformation in consumer behaviour,
logistics organisations will eventually be impacted.
At the moment, industrialists and supermarket chains are shifting
from a policy of «stocking goods» to one of «maintaining the
flow of goods» with the aim of reducing costs. These new
solutions reduce the risk of goods perishing (in particular
foodstuffs and fresh produce) and enable distributors to adapt to
new consumer purchasing patterns, in particular e-commerce
and the need for fast deliveries. The sector is therefore moving
towards a flow system with lower levels of stock, even if it
means making the suppliers bear the cost of stocking the goods.
This way of optimising stocks is creating a faster turnaround of
goods and generating demand for new types of premises with
cross-docking facilities.
Moreover, in a context where cost reduction is important, but
environmental factors and sustainable development are also key
elements in the decision-making process, the siting of logistics
facilities has become a strategic issue. Some of these facilities
are now considered to be too far from the centres of
consumption and production, which increases transport costs.
Such considerations will promote the notion of zones
composed of smaller buildings where costs can be reduced
via consolidation arrangements and the transport of goods
facilitated. Lorries arrive in these zones with a full load and
leave full, thereby reducing empty journeys to a minimum.
The zones have to be closer to the city to be able to meet these
criteria. This will be at the expense of the development that took
place between the sixties and the eighties, which tended to
involve very large logistics platforms further afield. For example,
at that time, a single consignor would have a major central
facility per region or even for the whole of France, an
arrangement that tends to go against today’s objectives.
Finally, in a market where the supply of premises is not likely to
shrink in the short term, it may be possible to convert old
buildings into modern facilities. The reuse of old sites would
redress the shortage of buildings complying with the latest
standards and meet environmental requirements. It is worth
noting that the cancellation of speculative developments
in 2009 will make some land available. These sites could
be used for turnkey schemes that are adapted to the specific
needs of companies.
The conversion of old stock is without doubt an area of growth
for the future and is one of the major economic and ecological
challenges for the sector. It will contribute to the renewal of stock
and help supply to be better matched to demand.
ZOOM: HOW CAN THE LOGISTICS MARKET ADJUST TO THE ECONOMIC CRISIS?
ZOOM: GREEN BUILDINGS
Now that standards have been set in France by the HQE®
(high environmental quality) certification for office buildings, the
time has come to set them for other products.
A framework of certification for logistics platforms introduced
by Certivéa and Afilog has been in place since January 2009.
The certificate NF Bâtiments Tertiaires - Démarche HQE® is
awarded if buildings meet certain criteria.
Like offices, logistics buildings must satisfy 14 targets relating to
green construction, green management, comfort and health, in
addition to two other targets defined specifically for logistics
buildings, «working conditions and management» and
«suitability of the building to the process».
All these processes and themes lead to the following principles:
• immediate surroundings: management of flow of goods on
the platform, to reduce the impact (noise, visual) on the
neighbourhood, use of multimodal hubs (rail, river etc.);
• energy: specific processes for energy consumption of offices
and warehouses, distinction between warehouses heated
above 12°C and those operating at less than 12°C;
• water management: reduction in the water-tightness of land,
landscaping of basins, water savings for fire sprinkler systems
etc;
• hygrothermal comfort: specific treatment of the warehouse,
thermal simulation in warehouse;
• visual comfort: optimise daylight in the warehouse (design
of glazing);
• air quality: make the most of natural ventilation in the
warehouse;
• working conditions (theme A) and the suitability of the
building to the process (theme B) are the two new themes.
This new set of standards was essential, but the problem of
financing improvments still remains. The logistics market has
particularly stable rents, but construction costs are increasing
steadily.
For more information: www.certivea.fr
11
ZOOM: SUPPLY CHAIN SERVICES AND OUTSOURCING
Outsourcing supply chain services is becoming more
widespread. The economic crisis accelerated the process
because outsourcing enables companies to cut costs. They may
be shortened from several items:
• manpower accounts for about 50% of total supply chain
costs, these are passed on to the logistics provider;
• when the entire supply chain is outsourced, in particular
when 4th Party Logistics provider services are used, the price
from the supplier to the industrialist can be directly
managed by the logistics company;
• consolidating services means road, real estate and other
resources can be shared with other industrialists thus reducing
costs;
• the flow of stock is managed by sophisticated information
systems, and logistics professionals have an over-arching
vision of stock flow that is not attainable by companies that
are not specialised in the field.
transport, stock management, real estate, supplier management
and so on. The list below summarises the services generally
proposed for each «Party Logistics» (PL):
• 1 PL: sub-contract transport;
• 2 PL: outsource transport and warehousing;
• 3 PL: integrate the supply chain to optimise it;
• 4 PL: outsource the entire supply chain, including the client,
its clients, the client’s clients and the client’s suppliers;
• 5 PL: management of the entire supply chain, and the
e-business platform.
Note that depending on the logistics provider’s services, each
level may be sub-contracted to another party, for example
packing, real estate, return of faulty goods and so on.
ZOOM: THE FRENCH PORTS AND DEVELOPMENT
TOTAL CARGO IN MAINLAND FRENCH PORTS IN 2008
(In thousand tons)
100
50
Calais
10
Dunkerque
Le Havre
Miscellaneous cargos
Bulk liquid
Dry bulks
Rouen
Nantes - Saint-Nazaire
La Rochelle
Bordeaux
Marseille
Source: DGITM/DST/PTF/PTF4
As the world’s 5th largest exporter and the 6th importer when
measured in value, France has a major port activity and a first class sea
front. Yet French ports lag behind other large European ports, especially
those in the north. The country’s largest container port, Le Havre,
only handles 24.5 millions of tons of container cargo, compared to
105 million in Rotterdam. In an effort to catch up, the country is making
12
The supply chain may be outsourced at different levels:
profound changes to the way maritime and river transport is managed.
The starting point was the port reform introduced in 2008 which is
leading to a multitude of investment and development projects.
The port of Le Havre has already invested approximately 1.5 billion
euros in a scheme known as Port 2000. The plan for the port is to take
full advantage of the need for multimodal facilities, so, an additional
700 million euros will be invested in the expansion and modernisation
of container terminals and the densification and improvement of rail
and waterway transport. Some of these objectives have been met by
developing more logistics facilities; the amount of space in Port 2000
has increased from 1 to 1.5 million sq. m. More developments are still
planned, for approximately 500,000 sq. m. The objective for 2015 is
to handle 6.3 million containers, compared to 2.7 million in 2007.
Dunkerque is also expanding substantially. New facilities have already
been built in anticipation but the port faces other difficulties and in
particular overland access to it. The A25 motorway to Lille could not
cope with a high increase in traffic. Sea to river transit is therefore
very important and is highly dependent on the success of the
multimodal platform in Dourges. Plans are afoot to triple the capacity
of warehousing in Dourges to 300,000 sq. m by 2013. Some 70
hectares are earmarked for construction and another 100 hectares will
be made available by 2010. Approximately 368 million euros are to
be invested in the port of Dunkerque over a five-year period.
The port of Marseille is to play a greater role in the French maritime
traffic in the future. The container facility in Fos will be expanded and
the port has taken a financial stake in the multimodal platform Pagny
Terminal which will facilitate the development of logistics services.
Supply chains will be reorganised to take into account new
environmental concerns, changes in consumer behaviour and the
expansion of e-commerce, essentially by being established closer to
towns.
In order to cope with these changes, owners of logistics real estate
must therefore adapt their buildings, innovate, and reassess working
structures and habits. One organisational concept that has been
common practice since the sixties is that of supply chains structured
around a large hub located in an outlying zone and only used by a
single consignor for the country or region. This concept now seems
destined to demise. Environmental concerns are or will be largely
responsible for new standards and regulations that started this shift.
To save on transport costs, the need to have logistics facilities closer
to population centres and production plants will increase. This
practice optimises the number of lorries arriving and leaving the site.
The proximity to cities, often coupled with shared services between
users, lowers the cost of last-mile delivery, reduces fuel
consumption, enables the consolidation of transport and
distribution of goods and shortens delivery times. The reduction of
delivery times is essential for supermarket distribution centres,
especially when foodstuffs and fresh produce are involved.
However, because local supply chain management is essentially an
urban activity and therefore close to residential areas, it faces many
difficulties:
• architecturally, the buildings must be attractively integrated into
the surroundings and take up less space than large warehouses,
so that the local authorities and communities will support the project.
Politicians and inhabitants alike can be very reticent about putting
up with the noise and visual pollution often associated with such
buildings;
• environmentally, sites must meet new environmental standards
and respect surrounding communities (again so that the latter
accept the presence of such sites);
• multimodality: new goods flow practices, which bypass storage
needs, and the objectives of maximising the flow of goods mean
that logistics sites will not only have to be integrated into the
landscape but also be served by the highest number of modes of
transport (motorway, rail, air, maritime, river). Consequently , there
will be continual demand for warehouses with rail links, which will
be a sound alternative to other forms of transport;
CROSS-DOCKING FACILITIES
This mode of transport, essentially using road transport,
handles deliveries under three tons. It is composed of a
pick up, consolidation-deconsolidation and dispatch of
goods, without any storage time. For this reason the
buildings are fitted with docks on each side so that
inbound lorries arrive, are unloaded, then the goods
dispatched.
The main feature of these premises is that they have a
much smaller floor area than traditional logistics
warehousing (on average between 3,000 sq. m and
6,000 sq. m, though sometimes exceeding 10,000 sq. m).
They also have a specific shape. They tend not to be very
deep buildings (to make the relay between inbound and
outbound vehicles as easy as possible) and they are
often long (to maximise the number of loading docks).
Their depth then is from 30 to 40 metres and length
150 to 200 metres. However, although only a small
amount of land is used for the actual buildings, a
relatively large amount of land is needed around the
buildings so that delivery vehicles can park, manœuvre,
unload and load up again.
In addition, to remain close to consumers, keep delivery
times as short as possible and keep customers happy,
these buildings must be located as close as possible to
urban concentrations, generally a few miles from them.
ZOOM: NEIGHBOURHOOD LOGISTICS WAREHOUSES
The average rent for a new cross-docking facility in
Ile-de-France at 1st July 2009 is from €90 to €120 net / sq. m.
In the provinces, average rents for this type of premises
are:
• Greater North: from €85 to €100;
• Rhône corridor: from €80 to €95;
• Greater South: from €90 to €110.
• land: last-mile delivery services are close to population centres so
sites are scarce, especially for buildings that require large areas.
The price of land is obviously higher for these sites than for outlying
locations. In the medium term, rents will automatically go up.
To conclude, urban logistics organisation is a challenge for the
industrial sector in the years ahead. It is dependent upon consumer
attitudes and environmental issues. It will only be able to develop if
a balance can be found between its needs and those of the local
community and the environment.
13
INTERVIEW: STÉPHANE COLLOT,
DIRECTOR OF REAL ESTATE, DHL FRANCE
What logistics services does DHL offer and how does it affect
real estate?
What consequences has the crisis had on your real estate
policy?
DHL can manage all or part of a supply chain, from transport to cross-docking
by way of storage. Everything depends on the client’s needs and most of all on
the type of goods involved.
One of the direct consequences of the crisis on our logistics property policy is
the slowdown of new developments. The number of new operations,
speculative and semi-speculative alike, has dwindled, due to the difficulty of
finding capital in a market where so little is available (from debt or shareholders’
equity). But AEW Europe has remained active, focusing instead on the
opportunistic acquisition of existing portfolios or assets.
What are the main types of products you deal with and what
logistics responses do you bring to each case?
We work in three major sectors and have a tailored real estate response for
each of them. The first sector is mass distribution, where large groups need to
supply their supermarket and hypermarket networks. This sector requires modern
logistics buildings with standard specifications. They are usually clusters (large
platforms) that are located as close as possible to population centres; this is
especially important when fresh foods are involved. On these platforms we try
as far as possible to pool services for different clients. This method allows us to
reduce the risk of leaving premises vacant and implicitly, lowers the costs of
services to consignors. The second sector, the clothing industry, calls for a
different response. It requires lower buildings than logistic warehouses because
the goods are stored in part on mezzanine levels. Where a building is located
depends primarily on the client’s strategy: it can either be near the
manufacturing plant then supply to retail outlets all over France and even
Europe, or on the outskirts of large consumption basins. The third sector is hightech technologies such as audio-visual and telephony services. This sector has
changed considerably over the last few years with the integration of high value
added services such as the packaging of goods and the management of
defective merchandise returns. To meet these new market conditions,
warehouses are usually smaller than the ones used for mass distribution, but
they can include workshops where tasks such as on-site repairs can be carried
out if necessary.
So for every type of service there is a real estate response?
Our property strategy does depend on the type of product transported, but it
is mainly the supply chain strategy of the company in question that determines
our response. Depending on where a given product is produced and what its
final destination is, warehouses will be located in different places and will not
necessarily have the same specific technical features for all clients, even if they
work in the same sector. The length, depth, height and size of logistics buildings
will be studied to ensure the most efficient load management and product
availability possible.
At what point in the supply chain does cross-docking come in?
Cross-docking is at the end of the chain in the direction of manufacturer to
consumer. It is an essential link in the chain and, ironically, the trickiest one to
implement. Cross-docking is used in particular for transporting small parcels as
far as the pallet. On these sites, the process can be broken down into two
phases: shipments are brought in bulked, broken down on the dock, and
redirected depending on their final destination. No storage is involved at all.
Cross-docking is delicate to set up because the buildings take up a lot of floor
space and the activity generates considerable nuisance, including noise
pollution and heavy traffic. In addition, cross-docking must be near population
centres, ideally less than five kilometres away. Designers take these constraints
into account upstream of projects to minimise the impact on the
neighbourhoods. Cross-docking is nonetheless economically and socially
worthwhile for municipalities in that they create more jobs than logistics activity
(about one job for every 50 sq. m of building space).
What specific features must a cross-dock have?
First of all, whereas the supply of logistics space is substantial and even
abundant, the supply of cross-docking space is still nonexistent to date, and
businesses are obliged to develop their new sites themselves. The best site for
a cross-docking combines proximity to the consumers it serves and an efficient
road network right at the exit from the building. The technical features are
increasingly standardised, with double-orientated buildings, 30 to 40 metres
wide, a ceiling height of 6 or 7 metres and floor areas of 4,000 to
6,000 sq. m on average.
14
INTERVIEW: RÉMY VERTUPIER,
HEAD OF LOGISTICS ASSET MANAGEMENT, AEW EUROPE
Our current policy, regarding the disposal of assets, tends to consist of making
the cash flow generated by our assets secure rather than selling them.
Regarding asset management, the chief objective is to keep our platforms
occupied on a long term basis. In an investment market where rental risk
management is no longer envisaged, products that are not let decrease in
value. So our goal is to keep our tenants in place for as long as possible. The
average occupancy rate for the logistics portfolio AEW Europe manages will
be over 96% for 2009.
The property crisis has reinforced the need to be close to our clients. Keeping
in touch is, more than ever, the key to good management.
How do you perceive the new measures adopted by the
Grenelle Environment Forum?
The new regulations for reducing energy consumption will result in the
construction of more energy-efficient buildings. For existing assets, investors will
have to prepare for introducing the Grenelle measures and improve their
buildings’ energy performance.
As soon as comparables are available on the market, green buildings will
present a real competitive advantage when letting or selling. Investors will be
less interested in buildings that do not meet environmentally-friendly criteria on
account of the expense involved to carry out the required works, and the same
is true for occupiers, who keep an eye on their overall real estate overheads.
It is very likely that the logistics sector will fare well with respect to the new
measures, as fairly significant productivity gains can potentially be achieved in
energy consumption, in particular in electricity (e.g., lighting management by
zones, organisation of a building’s lamping based on the racking plan.
Moreover, logistics platforms offer large areas where renewable energies such
as photovoltaics can be developed. The energy balance in platforms can be
improved and it is in the interest of the logistics sector to pursue this path, which
will also contribute to making its image more acceptable.
In anticipation of the Grenelle measures, AEW Europe, together with other
institutional investors and Bureau Véritas, initiated the Green Rating.
Furthermore, for two new developments in France, AEW Europe took steps
toward becoming HQE® (high environmental quality) certified and has obtained
one of the very first certifications in France.
What, in your opinion, are the medium-term trends in the
sector?
Despite a difficult economic context and a reduction in the volume of trade, the
logistics sector clearly has a future; but it must find a new model and adapt to
new modes of consumption. For example, the growing trend towards shopping
in local stores necessarily involves integrating logistics zones into urban areas.
This creates issues such as the architectural and environmental qualities of the
buildings to be integrated into the space. Being close to areas with a high
population density is a criterion for secure, lasting investments.
If a company is to last in this market, high-quality staff, responsibility and
environmental competence as well as the critical size of the portfolio it manages
are crucial factors.
In the medium term, then, we expect a significant reduction in the number of
owners/investors present in the logistics segment like AEW Europe.
It has been a difficult year for the market of industrial premises
and small warehouses. The main users of these buildings, SMEs,
are seeing their profit margins squeezed, so managers are putting
off real estate decisions until a later date. In this context vacated
premises and new developments are not being let or sold so
immediate supply has increased. Rents have been under great
pressure and, although many landlords have not yet accepted the
fact that adjustments have to be made, lower rents seem inevitable.
TRENDS IN TAKE-UP OF LIGHT INDUSTRIAL SPACE AND WAREHOUSES
<10,000 SQ. M IN ILE-DE-FRANCE
(In thousand sq. m)
1,500
1,200
900
600
300
Demand shrinks
The economic crisis has undercut the market’s base with business
uncertainty reducing demand. Owner-occupiers are being
prevented from buying due to the difficulty in obtaining credit. Thus,
the number of companies looking for space to buy was particularly
low at the end of 2008 and the start of 2009. Recently the number
of requirements has stabilised and reasonable financing packages
are being mounted, but they are still few and far between. In
addition, SMEs are feeling the brunt of the widespread contraction
in industrial production and need to reduce real estate overheads.
The effect of this trend is to dampen any desire to change and
occupiers are much more inclined to stay put and renegotiate ongoing leases.
A characteristic of take-up at the start of 2009 was the increase
in the number of demands for floor areas between 500 sq. m and
2,000 sq. m. The most dynamic sectors in this size bracket are
e-commerce businesses, which require buildings close to the
residential areas that need serving, and the food industry, in
particular hard-discounters. These sectors are still performing well
despite the crisis because they are positioned on segments that attract
more clients when purchasing power is falling.
03
04
05
Take-up
06
07
08
H1 09
Estimate year end
TAKE-UP BY FLOOR AREA BRACKET AT 1ST HALF 2009
> 5,000 sq. m
27%
< 500 sq. m
10%
500 - 1,000 sq. m
15%
3,000 - 5,000 sq. m
16%
INDUSTRIAL PREMISES AND SMALL WAREHOUSES
<10,000 SQ. M
1,000 - 3,000 sq. m
32%
Another behaviour that could become more significant in the future
has returned, albeit on a relatively sporadic basis, and that is
companies looking to group their activities on a single site
(headquarters, industrial space and warehousing together). Such
searches are made as part of a cost-cutting exercise that also
optimises space use and improves productivity.
Take-up falls yet again
Following reductions in 2008, take-up continued declining to stand
at 512,200 sq. m at 1st July 2009, a drop of 14% compared to the
same period in 2008. This trend is the natural continuation of the
contraction in occupier interest. There is also a large gap between
occupiers’ requirements in terms of quality of space and location
and the premises available on the market. Most of the supply of
industrial space and warehousing is old and rarely meets standards
in force, yet the rents are quite high, especially in areas where
demand is high (e.g. in the Inner Rim). In addition, moves today are
systematically carried out to cut costs, occasionally as small
extensions, so the price factor is very important, but rents have tended
to remain at the same level, despite pressure from occupiers.
TAKE-UP BY TYPE OF PRODUCT AT 1ST JULY 2009
Warehouses
40%
60%
15
By contrast, take-up for small warehouses (< 10,000 sq. m) rose by
17% from July 2008 to July 2009. Although this cannot be
considered a turnaround in the market, occupiers’ need for this kind
of small building, on average 4,000 sq. m, derives from the need to
have sites close to consumer centres, usually to ensure the last-mile
delivery. This demand appears to be here to stay because there is
such a large gap between supply and demand, particularly in
quantity.
While there was a substantial fall by 31% in take-up in the north
and south of the Ile-de-France region, these sectors continue to
attract the bulk of take-up of industrial space and warehouses
<10,000 sq. m, accounting for 59% since the start of the year.
Most of this is based in the section between the A86 and the Paris
orbital motorway, La Francilienne.
Take-up is mainly for second hand buildings in used condition,
because new buildings are more expensive. In addition, financial
concessions granted by landlords have been increasing; they
virtually always cover some tenant works, an incentive that is
particularly effective in persuading occupiers to choose second hand
buildings.
Immediate supply increases
The supply of vacant industrial buildings and small warehouses
has risen. The trend is largely due to premises being vacated
generating a negative net absorption; companies move to optimise
space use, taking less space than they quit. Although several
completions have fed immediate supply, particularly at the end of
the year, the dramatic reduction in new developments since October
2008 has restricted the total volume. Consequently immediate supply
at 1st July 2009 stood at 2.6 million sq. m, compared to 2.4 million
at the start of the year. This rise could be seen across Ile-de-France,
but a greater share was in the north, where more industrial parks
have been developed.
Within A86
24%
Beyond N104
17%
Between A86 and N104
59%
TRENDS IN IMMEDIATE SUPPLY IN LIGHT INDUSTRIAL SPACE AND WAREHOUSES
< 10,000 SQ. M IN ILE-DE-FRANCE
(In thousand sq. m)
3,000
2,400
1,800
1,200
600
03
04
05
06
New
07
H1 09
IMMEDIATE SUPPLY BY FLOOR AREA BRACKET AT 1ST JULY 2009
Future supply adapts to market conditions
> 5,000 sq. m
36%
The divergence between rents for these parks and companies’
capacity to pay did nothing to help matters.
08
Second hand
Immediate supply is still, for the most part, composed of old out-dated
buildings. These are usually buildings owned by private investors
who do not have the financial capacity to carry out improvements.
As a result the buildings are vacant for long periods and are now for
sale on the market.
The amount of new developments being undertaken dropped
sharply in the 1st quarter. Speculative schemes in the pipeline
stood at 156,900 sq. m at 1st July 2009, a 30% drop in six months.
There were two contributing factors. First there was a fall in demand
from occupiers so developers were naturally more cautious. Second,
and this is intimately linked to the first factor, developers had difficulty
in finding funds to finance purely speculative developments.
16
GEOGRAPHIC BREAKDOWN OF TAKE-UP AT 1ST JULY 2009
< 500 sq. m
2%
500 - 1,000 sq. m
8%
1,000 - 3,000 sq. m
31%
3,000 - 5,000 sq. m
23%
GEOGRAPHIC BREAKDOWN OF FUTURE PROJECTS AT 1ST JULY 2009
those schemes that are officially approved but are waiting for an
(In thousand sq. m)
occupier, is also down compared with the 1 quarter 2009. This
420
st
runs counter to expectations in that it is directly proportional to the
current crisis in the property market. Development projects have been
350
frozen at a very early stage in the process, before any feasibility
280
study is carried out or planning permission filed. Preliminary
210
architectural studies are already a considerable expense, and
investors are waiting for more positive signs from the letting market
before spending.
140
70
The volume of semi-speculative schemes stood at 404,200 sq. m
Speculative
at 1 July 2009, up from 389,200 sq. m 6 months previously. The
st
majority of projects are situated in the north of the Paris region. One
Within A86
Semi-speculative
Between A86 and N104
Beyond N104
important change in the region is the emergence of the east as a site
for light industrial activities, thanks to land being made available
for development. The east is usually considered a secondary location
for industrial premises and has a predominance of logistics buildings.
But developers have started taking an interest in the sector for
industrial developments because land is cheaper than in established
industrial sectors, so rents there are more in line with what occupiers
are willing to pay.
Rental values about to descend
The amount of space planned in semi-speculative schemes, i.e.
While headline rents have not changed greatly for the moment,
they still vary greatly depending on the location of the building, its
condition and, above all, competition in the sector. Occupiers prefer
to remain in the same sector, usually within 5 km of their original site,
so supply in the neighbourhood is the real competition. As a result,
commercial concessions are increasingly frequent, with occupiers
taking full advantage of their dominant position in negotiations.
In the 1st half, commercial concessions expanded progressively,
usually through franchise type agreements. In six months, these
«discounts» have risen from 1 to 2 months of rent-free accommodation
for each year of commitment to the lease, or even more for buildings
HEADLINE RENTS OF LIGHT INDUSTRIAL SPACE IN ILE-DE-FRANCE AT 1ST JULY 2009
(In € net /sq. m pa)
Sector
Product
North
Industrial SME*
€70 / 110
€60 / 90
Services activities
N.S.
€85 / 120
Warehouses (< 10,000 sq. m)
€55 / 75
€40 / 65
Industrial SME*
€85 / 125
€60 / 90
Services activities
€150 / 160
€90 / 150
€70 / 80
€50 / 70
that have been vacant for over a year. The second concession
granted by owners is the payment of works in the building for the
tenant. The cost of these works can reach a substantial sum so this is
West
an important trend. But it enables landlords to carry out works to
improve their assets.
New
Second hand
Industrial SME*
€65 / 110
€50 / 65
The west of the Paris region is still the costliest, with quality business
Services activities
€75 / 110
€60 / 75
parks close to large business districts generating a lot of competition
€54 / 75
€38 / 50
between large companies looking for extra office space or back up
East
Industrial SME*
services and SMEs. As a result, small companies tend to be forced
€65 / 90
€55 / 72
Services activities
to go to business parks further from the capital. The north is the
€80 / 105
€65 / 85
N.S.
€45 / 54
second market when ranked by values, offering a higher
concentration of industrial buildings, particularly in new estates. This
zone benefits from a dense infrastructure and great market maturity.
South
* proportion 70/30
N.S.: Not significant
17
ZOOM: THE MARKET FOR INDUSTRIAL PARKS
This section was prepared using CB Richard Ellis’s database on industrial
parks that is composed of 152 parks located throughout Ile-de-France (Cf.
definitions of industrial parks).
Whether we consider the slowdown in take-up, the drop in rents or the
financing difficulties facing developers, the market for industrial parks
has undergone a brutal slowdown that is very similar to the one seen
from 2001 to 2004.
Construction is being put back until a later date and some projects are
being converted from one use to another while others are simply being
abandoned due to the impact of the economic crisis on the market.
Consequently the future supply of speculative schemes is at its lowest
since 2004, with only 5 parks in the pipeline, compared to 12 a year
previously, for a total of 143,400 sq. m. The start of construction on new
schemes is generally scheduled for a later date to avoid voids, as
developers consider the vacancy rate is too high. As a result, schemes for
which planning permission is granted are waiting to be let, totally or
partially, before works are started. This drop in activity is particularly
noticeable in the north of the Paris region, where parks have been the
most numerous in recent years.
At the start of the crisis, figures for semi-speculative schemes rose because the
number of construction starts dwindled. But now many have been
abandoned altogether and very few new ones initiated. For cost reasons,
developers and owners no longer start the process for the development of
new schemes. Consequently, semi-speculative schemes stood at 228,700 sq.
m at 1st July 2009, compared to 300,000 sq. m at the same date in 2008.
In parallel, there was a considerable fall in take-up. The occupation rate
of industrial parks crumbled to 67% compared to 89% two years ago.
To meet the needs of occupiers and in an attempt to have the competitive
edge in an increasingly competitive market, development projects are
becoming more innovative. For example, while they had more or less been
abandoned, service areas linked to estates are once again becoming more
popular. These service areas may propose restaurant facilities, or services
for small children, food services, dry cleaners etc. In addition, landscaping
and environmental aspects are becoming more important, with more roof
vegetation, grey water retrieval etc. All these aspects are implemented to
attract a wider clientele to the market segment – approximately 5% of
demand is for new space. The downside is that these improvements lead
to higher rents which tenants are reluctant to pay.
THE MAIN INDUSTRIAL PARKS IN ILE-DE-FRANCE*
Taverny
Goussainville
Le Thillay Roissy-en-France
Tremblay-en-France
Gonesse
Cormeillesen-Parisis
Achères
Villeneuvela-Garenne
Argenteuil
Sartrouville
Gennevilliers
Carrièressur-Seine
Pierrefittesur-Seine Stains
Mitry-Mory
95
Aulnay-sous-Bois
Villepinte
Le Blanc-Mesnil
Le Bourget
Saint-Denis La Courneuve Drancy
Saint-Ouen
Aubervilliers
Pantin
Paris 18
Bondy
Noisy-le-Sec
Romainville
Croissy-sur-Seine
75
92
77
93
Fontenay-sous-Bois
Lognes
Bois d’Arcy
Élancourt
Ivry-sur-Seine
78
L’Haÿles-Roses
Trappes
Coignières
94
Bonneuilsur-Marne
Antony
Magny-les-Hameaux
91
Massy
Palaiseau
Speculative parks
Vitry-sur-Seine
Choisy-le-Roi
Chevilly-Larue
Thiais
Fresnes
Les Loges-en-Josas
Completed parks
Alfortville
Villejuif
Semi-speculative parks
Villebonsur-Yvette
Wissous
ChillyMazarin
Morangis
Villeneuve-le-Roi
Athis-Mons
* Some parks in the sample are not represented on the map because they are too far from the centre of the region.
(8 parks completed and 1 semi-speculative scheme in the 77 department, 7 parks completed and 2 semi-speculative schemes in the 91 department, 1 completed scheme in the 95 department)
18
TRENDS IN INVESTMENT BY ASSET CLASS
(In million euros)
Further deterioration
At less than 250 million euros in the first six months of 2009,
investment in industrial space and warehousing has tumbled by
70% in one year. The sector was not spared the slump seen
nationwide in the 1st half. Yet with 11% of total investment in France,
the sector’s share of total investment has followed the long-term trend.
One counter trend is worth noting, while investment across the board
tended to rise in the 2nd quarter, transactions on light industrial
premises and warehouses slowed down. A few large transactions on
new buildings took place in the 1st quarter, but the number of
transactions slumped in half in the 2nd quarter. The steeper decline
was particularly noticeable in the logistics sector, which, despite the
fall, still dominated the market. Industrial premises accounted for just
under a quarter of investment volume.
The tight restrictions in credit availability continued, even though
financing costs have relaxed a little, so large transactions are still very
difficult to finance. For example operations involving the sale of
large warehouse portfolios, which had fuelled the market in recent
years, have now disappeared. As a result, the volume of transactions
on isolated properties is now four times greater than for portfolios; in
2008 the two were equal, and in 2007 isolated sales amounted to
half the volume of portfolio sales. The biggest transaction in the
1st half was under 25 million euros, and the average transaction
value works out at 9 million euros.
3,500
20%
2,800
16%
2,100
12%
1,400
8%
700
4%
01
02
03
04
05
06
07
08
H1 09
Warehouses
Share in total commercial real
estate investment
INVESTMENTS
Much like 2008, most transactions were concentrated in regional
France, a reverse trend to previous years. Ile-de-France, which has
had disappointing results since 2007, only attracted a third of
investment when multi-site portfolios are excluded, and these were
essentially in the Outer Rim. In regional France, the Rhône-Alpes, with
18% of transacted volumes, was the preferred choice of investors in
light industrial space and warehousing, followed by Nord and
Champagne-Ardenne.
THE MAIN INVESTMENT TRANSACTIONS IN THE 1ST HALF 2009
Date
Localisation
Seller
Buyer
Main use
Total floor area
Amount
Q1 09
Reims (51)
N.C.
Gecina
Logistics
42,000 sq. m
€25.2 M
Q1 09
French portfolio
Man
Foncière Inea
Logistics
18,700 sq. m
€23 M
Q1 09
Chaponnay (69)
Gazeley
Fortis Lease
Logistics
29,000 sq. m
€21 M
Q1 09
Gonesse (95)
ING Industrial Fund
Argan
Logistics
22,000 sq. m
€18.3 M
Q2 09
Wattrelos (59)
Goodman Logistics Developments
Curzon Capital Partners II
Logistics
26,735 sq. m
€16 M
Q1 09
Innovespace park / Lieusaint (77)
Alsei
Foncière Inea
Industrial
16,350 sq. m
€15 M
Q1 09
Villas portfolio / Outer Rim
Kenmore European Industrial Fund
Continental Property Investments
Industrial
14,895 sq. m
€14.5 M
Q1 09
Provinces portfolio
Veolia Transport
Foncière Atland
Logistics
23,800 sq. m
€11.9 M
Q2 09
Atton (54)
Nexity Geprim
Private
Logistics
18,839 sq. m
€11 M
Q1 09
Les Quais de l'Atlantique /
Port authority of Dunkerque (59)
Kieken Immobilier Promotion
Foncière des Régions
Logistics
20,000 sq. m
Est. €10 M
N.C.: Not Communicated
19
Players wait and see
Barriers that led to a downturn in market activity in 2008, such as
financing difficulties and the reluctance of sellers to reduce prices
to ones buyers are prepared to pay, are more than ever present.
Consequently, sales between investors are still at a standstill. Despite
the tax incentives introduced in the SIIC 4 regime with its sale and
leaseback schemes, the volume of sales by occupiers has dropped
dramatically in the 1st half of 2009. Higher yields and a fall in market
prices seem to have crushed any thought of outsourcing that
companies may have had. Developers are the only group of owners
that are still selling, accounting for more than half of investment. Due
to the on-going difficulty in funding sales off plan, investors this year
have given preference to new assets that are already completed and
secured with long-term leases.
As for buyers, there is a tendency to stick to domestic markets and
core targets. French investors therefore dominated the French market,
accounting for three-quarters of the volume of transactions. The only
other category with any degree of activity is the group of
miscellaneous European investors. In contrast to office and retail
markets, the logistics and industrial sector has not benefited from
the start of a return of international investors that was seen in the
second quarter (especially the return of anglo-saxon investors).
Consequently investment funds were absent for the 1st half. In general,
opportunist players shied away from a sector in which the letting
market is deteriorating. The market was less competitive and was
dominated by small transactions. It was therefore more accessible to
equity investors with limited investment capacities, such as private
investors who made significant inroads in the market. Property
investment companies other than listed SIICs are less subject to debt
reduction issues and were also quite active.
Yields stabilise, before market activity picks up
Following a year and a half of steady increases, yields on real estate
seem to have reached a plateau, with yields for prime logistics space
at 8.25%. Whatever the type of property, the lower end of the yield
range remained the same in the 2nd quarter 2009. However the trend
for the yield spread to widen for secondary products continued.
Since the low point at the end of 2007, the rise in yields has been
spectacular, increasing by 225 points for the best assets. Yields are
therefore close to an all-time high, standing at a level that reflects the
limited lifespan of this kind of building. This stabilisation of yields for
prime properties could incite investors to take a renewed interest in
industrial and logistics developments. Negotiations are underway
for large assets. Indeed at the start of the 2nd half, the largest industrial
portfolio sale to go through this year took place. Yet for buyers, there
is still a great deal of uncertainty, especially with regards the letting
market. Demand has shrunk, leading to a drop in rental values. And
despite the stabilisation of yields, market values could continue to
fall, but this time less extravagantly.
20
BREAKDOWN OF SALES/ACQUISITIONS BY TYPE OF INVESTOR
Sales
Acquisitions
-10%
41%
- 8%
18%
- 4%
20%
- 55%
- 10%
21%
- 12%
60%
40%
20%
0%
20%
40%
60%
Property companies
Investment funds
Developers
Institutional investors
Privates
Occupiers
NET INITIAL YIELDS IN FRANCE AT 1ST JULY 2009
Class A warehouses
8.25% - 9.00%
Class B warehouses
9.00% - 9.75%
9.25% - 12.00%
Prime industrial parks
9.00% - 11.00%
In the absence of figures in some sectors, some statistics in this table were supplied by
market experts.
N ET
INITIAL YIELD
Gives as a percentage the ratio between the net income
(excluding taxes and charges) from a property and the
acquisition cost (price of the building plus fees and
transfer duties).
TRENDS IN PRIME YIELDS IN FRANCE AT PERIOD END
10%
8%
6%
4%
2%
01
02
03
04
05
06
Industrial parks
07
08
H1 09
Class A warehouses
CB RICHARD ELLIS
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CAPITAL MARKETS

the logistics and light industrial space in france

Transcription

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