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CBRE : Global Investors Add Industrial Real Estate to Portfolios as Structural Changes Transform Supply Chains

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12/13/2017 | 07:27pm CET

Global Investment in Industrial Real Estate Reaches $85.8 Billion YTD

Abundance of Institutional Capital and E-Commerce Growth to Drive Investment in 2018

Growing Trend of Cross-Border Investment, Especially from Asia

Strong investor appetite for logistics real estate fuelled by e-commerce growth and demand for last-mile logistics, combined with an abundance of institutional capital in the global market, is driving increased investment in the sector that is expected to continue in 2018, according to the latest research from global property advisor CBRE.

Strong interest in prime logistics assets continues in most industrial hubs around the world, with $85.8 billion in total investment volume in the first three quarters of 2017-an increase of 12% year-over-year. This has led to widespread yield compression, with 46 of the 64 global markets tracked by CBRE recording a decrease in prime yields since Q3 2016. The logistics sector is poised for continued growth amid rapid e-commerce expansion and positive market fundamentals across all regions. This will continue to drive global demand and investment in the sector in 2018.

Overall, the prime logistics sector is performing well in the Americas, EMEA and Asia Pacific, supporting a healthy capital investment environment with steady yield compression in most industrial hubs. The logistics sector continues to be impacted by structural changes, such as online retailing, that have transformed global supply chains. E-commerce operators require an estimated average of up to three times more space than traditional warehouse users due to a greater diversity in products handled and the need to have them immediately accessible. This has piqued the interest of global investors who continue to add industrial assets to their portfolios at lower cap rates, with the reasonable expectation that they will achieve immediate rent growth.

There is a growing trend of cross-border investment into industrial real estate, especially from Asia. Despite Chinese government restrictions on overseas investments as of late 2016, Chinese investors have acquired more than $773 million in U.S. industrial real estate to date this year-equating to 89% of their U.S. investment total for all 2016[1]. Asian capital has also been targeting Europe. In June 2017, sovereign wealth fund China Investment Corporation agreed to purchase Logicor, a pan-European logistics company, from Blackstone for $12.25 billion. The 147 million-sq.-ft. portfolio of high-quality logistics assets spans 17 countries, with 70% of it concentrated in the U.K., Germany, France and Southern Europe.

'Industrial demand and strong property fundamentals, particularly in this cycle, have piqued the interest of global investors, especially from China. Domestic wealth has grown significantly in China in recent years, and investors are seeking to diversify their portfolios with global acquisitions in the U.S. and Europe. Competition for prime industrial properties is strong, and the volume of capital that is under-allocated in the industrial asset class has become increasingly aggressive,' said Jack Fraker, managing director, Global Industrial & Logistics, CBRE.

'Prime logistics is an attractive asset class for investors that provides a high return and stable cash flow due to the strong user fundamentals, which is largely fuelled by e-commerce growth and demand for last-mile logistics. Given the amount of institutional capital in the global market, and the robust appetite for logistics real estate, strong investment activity should continue in 2018 with some markets experiencing further yield compression,' added Mr. Fraker.

EMEAhad the largest decline in yields year-over-year. Prime yields decreased by an average of 35 basis points (bps) over the 12-month period (Q3 2016 - Q3 2017), with most European markets seeing a decline. Yields tightened the most in Paris/Lyon (-75 bps to 5.00%) and Munich (-60 bps to 4.50%).

Nearly half of the Americas markets experienced yield compression year-over-year. The U.S. industrial market continues to experience tightening fundamentals, with limited new supply and rising rents, driving capital flight to high-performing markets such as Seattle, Oakland, Los Angeles/Orange County, New Jersey and Inland Empire, each of which recorded cap rates of between 4.00 and 4.25%.

Increased turnover and yield compression is driven by demand for logistics facilities in APAC. Investment turnover in the sector increased 51% year-over-year in Q3 2017, while yields tightened by 29 bps year-over-year to 6.68%. Demand from e-commerce has been strong in China, South Korea and India, with many investors taking advantage of this structural change in consumer behavior.

[1] Real Capital Analytics

CBRE Group Inc. published this content on 13 December 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 13 December 2017 18:26:04 UTC.

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Financials ($)
Sales 2017 14 020 M
EBIT 2017 1 113 M
Net income 2017 821 M
Debt 2017 2 624 M
Yield 2017 -
P/E ratio 2017 17,90
P/E ratio 2018 16,35
EV / Sales 2017 1,24x
EV / Sales 2018 1,10x
Capitalization 14 709 M
Duration : Period :
CBRE Group Inc Technical Analysis Chart | CBG | US12504L1098 | 4-Traders
Technical analysis trends CBRE GROUP INC
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 8
Average target price 42,8 $
Spread / Average Target -1,1%
EPS Revisions
Robert E. Sulentic President, Chief Executive Officer & Director
Raymond E. Wirta Independent Chairman
James R. Groch CFO & Global Director-Corporate Development
Chandra Dhandapani Chief Technology & Digital Officer
Bradford M. Freeman Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
CBRE GROUP INC39.16%14 716