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French logistics driven by structural changes and end-users

2 MIN READMarch 07, 2019
GRI Club France met on 20 February in Paris to discuss logistics and whether the asset class presents both a safe haven for investors, as well as a good bet in the long term. Several pure players in logistics real estate were present and the discussion covered investment issues, the dynamics of localisation, French regulations, last mile logistics, new trends and the future of logistics real estate.

Logistics: for and against

Participants identified key reasons for investing in logistics, such as the variety of assets and low vacancy rates. It was noted that decompression in office yields has led to a renewed interest in logistics amongst some multi-asset investors. Furthermore, logistics is generally considered to be a growing market, driven more by structural changes than by financial reasons; as such, new investors have been attracted to the market by the opportunity to secure long leases and manage core assets, in order to weather any future financial downturn. 

On the other hand, participants also mentioned certain disincentives and barriers to entry when it comes to investing in logistics real estate - in particular, a lack of land. In certain regions - around Lyon, for example - there is almost no land to be had, which is perceived by some as a sign of what might happen in the rest of France over the coming months and years. Scarcity of land is partly the reason for the difficulty in starting new projects, although participants also discussed constraints caused by technological regulations, as well as agricultural and ecological compensation. These constraints weigh heavily on investors and developers, extending the time taken from identification of land through to its acquisition. Low levels of rent were also mentioned by investors: despite a slight increase in the amount of rent received in France by owners of logistics assets, levels remain below those received in other European countries.

The logistics of tomorrow

According to participants, the logistics market is changing not just because of investors, but partly because of the requirements and expectations of end-users, as factory-like automation is brought in to help boost performance.

Future demand for XXL platforms, which have been created in the last few years, was called into question. It was suggested that whilst the right urban logistics model had yet to be invented, it would involve designing smaller platforms. Furthermore, future development would be driven by operators capable of responding to urban issues.

Logistics will be discussed further at France GRI 2019 on 9-10 April in Paris and at GRI Light Industrial & Logistics 2019 on 6-7 November. 
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