The logistics sector tested by the Covid-19
Like other parts of the French economy, the logistics sector has inevitably been impacted by the health crisis of recent months. On the other hand, a rapid recovery can be observed both in the rental market and in investment or development, according to the players in the logistics sector who met yesterday at a webinar organised by Business Immo.
"Thefirst half of the year was terrible for the logistics rental market, with an immediate halt to transactions and building sites, and therefore to deliveries, which led to This led to a 50% drop in take-up", says Laurent Sabatucci, Director and Partner ofEOL. The most significant drop is observed in large-scale operations. Whereas last year EOL counted some twenty transactions exceeding 50,000sqm in 2019, representing around 40% of the rental market, the consultancy reports only three this year.
Nevertheless, the real estate consultancy is seeing improvements. Firstly in terms of the number of transactions, 32 in thefirst half of the year, which should bring the market to around 60 transactions for the year. A volume well below the last three years, but in line with the ten-year average. Furthermore, Laurent Sabatucci is pleased with the recovery observed in the existing buildings segment: "This reflects the structural dynamism of our market. We see that existing buildings continue to be rented and vacancy rates have not increased in any of the major markets. Also, despite the sharp fall in turnkey transactions, which is quite normal in the current circumstances, rental levels are not falling.
Cécile Tricault, Managing Director Southern Europe at Prologis, confirms: "We saw a strong recovery in rental activity at the time of the lock-up, with a fairly high demand from logistics providers. However, we are approaching September with caution as, depending on the state of the French and European economies, we may start to see some pressure on occupancy rates.
Investors maintain their appetite for logistics
Investors are still very interested in the logistics asset class, according to EOL data. We were lucky to have a very strong first quarter of 2020 thanks to the sale of portfolios, with €1.5bn invested," says Laurent Sabatucci. Investors recognise the strategic nature of the logistics sector and, because the development of turnkey assets is becoming complicated, its potential to create value.As a sign of investor confidence, three or four greenfield projects are expected to be launched in 2020," he continues: "This number is obviously well below the 10 to 15 greenfield deals seen in recent years, but it is already a very strong signal that investors are continuing to launch greenfield deals given the current situation."
Due to the confirmed investor appetite and the low number of assets currently available on the market by the end of the year, EOL does not expect a downward price review on prime assets. "The level of supply is comparable to that observed at the end of 2019. While there will certainly be a bit of selection on certain locations, investors are present and want to buy logistics, which allows us to have a quite decent pipeline on this market."
Sustained development, but slowed by administrative delays
In light of the barometers carried out over the last three months, Afilog confirms a strong level of activity in the development of logistics assets, but deplores the administrative difficulties encountered by its members: The most profound impact on members is undoubtedly the increase in the time required to process building permits and other authorisations, which has increased over the last few months," reports its president Claude Samson. Several orders issued in April and May have not resolved all the problems."The association regrets that all the examining services are still clogged up, or even closed for a certain number of them," Claude Samson continues: "There is impatience on the part of companies, all the more so as our European neighbours are starting up again a little more quickly than we are.
The other major difficulties identified by the association concerned the management of human resources, the organisation of work sites and the organisation of cash flow. However, the situation has improved over the last few months, according to its president: "After a period of almost total stoppage until mid-April, we can see that the recovery has been gradual and almost all the work sites have resumed today. The actual recovery in May seems even stronger than that anticipated at the time of the March and April surveys.
Also, according to Roland Paul, President of GSE, the logistics sector has demonstrated its resilience in recent months compared to other asset classes: "Unlike other sectors, all our logistics deals have continued and those in progress have been signed during this period. Even our greenfield projects continued, even maintaining activity on the sites and implementing sanitary measures were complicated.
Developing the competitiveness of the sector
On the strength of these encouraging observations, Afilog predicts that 2020 should normally be relatively unaffected by the crisis, as should 2021. On the other hand, risks could emerge for the following years due to the few projects currently underway.
To face these risks, the logistics sector can count on the support of the government, assured Geoffroy Cailloux, deputy director of market services at the General Directorate of Enterprises: "The crisis has shown the extent to which logistics is strategic in supply, particularly in masks or food processing. It is important for the government's policy that we are concerned about logistics even when everything is going well and the recovery is confirmed in 2020 and 2021. Our job at the DGE will be to ensure that constant work is done to improve the competitiveness and attractiveness of this sector. "
The quest for competitiveness is also what guides the roadmap of France Logistique, an association created last January with the idea of coherence and a common cohesion of all logistics players. We must ensure that logistics becomes an asset for France, as it is for the economy of a number of our neighbours," says its president, Anne-Marie Idrac. The crisis has only accentuated the needs in terms of fiscal and regulatory competitiveness, massification and skills. The reasons why we are lagging behind are not economic, but have to do with organisational and visionary difficulties between administrations. France Logistique will therefore be there to bring to the attention of the public authorities the vision of a France that could take much better advantage than it does of the advantages of its geographical position.