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JLL’s annual Global Logistics Sentiment survey shows promise for occupiers and investors
Industrial and supply chain real estate occupiers and investors alike experienced a record-breaking year in 2015 and should expect this trend to continue well into 2016, according to a new JLL logistics survey report released today. Strong demand for logistics facilities is expected to remain consistent globally during 2016. Rental growth is projected to continue across all markets of the world in 2016 and through 2017.
"Last year was like no other year on record, with historically high amounts of capital flowing into prime logistics real estate in key markets around the world, and there continues to be robust leasing by corporate tenants," said Craig Meyer, President, Industrial Brokerage and Capital Markets, JLL Americas. "Last year was a peak year, and although investor and occupier demand may not reach those unprecedented highs, all forecasts predict that and we will have another great year overall."
This year's survey – that features the opinions of 650 JLL logistics real estate experts from across the globe – found that most industry participants expect occupier and investor demand to remain healthy in many markets and also predict the following:
1. Expectation: Available supply will continue to contract, but new development will add more class A product to the market. Demand continues to exceed supply for sophisticated supply chain real estate around the world. Increased levels of development in 2015 helped to satisfy the demands for prime efficient logistics space, but responses still show significantly less property options than the initial survey last year. Global supply is expected to increase marginally in the first half of 2016, driven primarily by availability in Asia Pacific. The Americas are predicted to remain slightly undersupplied, while EMEA is expected to reach close-to-market equilibrium in the next six months.
2. Expectation: Rent growth will continue, especially in EMEA and Asia Pacific. Rent growth continued significantly in all three regions, particularly in the Americas, and all scores of market optimism are up, even over last year. More than half of respondents from the Americas predict that rents will peak in their region in late 2016, while peak predictions for EMEA and Asia Pacific were dispersed across the next eight quarters.
3. Expectation: Investor demand will remain high. Demand for global logistics real estate was extraordinarily high in JLL's 2014 survey, with a global positive balance of 74 percent, scored by the net of positive or negative responses as a percentage of all answers. That number is 57 percent in this year's survey, down but not insignificant in terms of investor attraction in the sector. Investor demand for the Americas remained unchanged in 2015, while demand dropped significantly in EMEA and Asia Pacific. Looking forward, investor demand is expected to remain positive while returning to a steady state, with all global respondents anticipating property values to peak in the second quarter.
4. Expectation: Prime investment opportunities will remain solid in the first half of 2016. While logistics real estate for investment continues to be in short supply in all three regions, respondents anticipate more properties to become available in the next six months as sellers seek to capitalize on high market values. It is also an optimum time for a number of ownerships to recapitalize existing debt and equity structures. In the Americas, 2015 was a year of sizeable portfolios, and while this trend may cool in 2016, investment opportunities of smaller portfolio sizes may broaden.
5. Expectation: Industrial and logistics real estate values will rise, but with moderation. JLL's 2014 sentiment survey showed that cap rates were falling in more markets than they were rising. The 2015 survey reveals that compression has continued across all three regions, particularly in EMEA. Rising rents and improving market fundamentals are expected to help drive value growth as we move forward.
"Taking a look at the expectations for broad rental growth, institutional investor interest and the demand for new class A product, we can predict 2016 to be a promising year for corporate occupiers, investors and developers around the globe," explains Meyer. "We are seeing investor demand being spread more evenly throughout the three regions, indicating a very strong 'steady state' in the coming months."
About the Global Logistics Sentiment Survey
JLL's annual 2016 Global Logistics Sentiment Survey features the opinions and knowledge from 650 logistics real estate experts in the Americas, EMEA and Asia Pacific regions. Participants were asked to comment on the key market trends of the past six months and their predictions for the next six months. The survey is based on the "balance of responses" methodology, common to sentiment surveys, as detailed in the full report.