The average spread between prime industrial and prime shopping center yields across mainland Europe has converged for the first time as demand for logistics soars, a result of increased levels in e-commerce, according to Savills. The historic average spread between prime shopping centers and prime industrial yields was at 143 bps until 2018, when it dropped to 108 bps. It fell further in 2019 to 54 bps. In the first quarter of 2020, for the first time, prime industrial yields were 9 bps lower than prime shopping center yields, at 4.95 percent versus 5.04 percent. “This convergence of prime industrial mainly logistics and retail shopping center yields reflects the shift of investor interest into logistics properties and away from physical retail, along with the rise of e-commerce and the growing demand for warehousing space by 3PL providers and retailers. This trend is one that has been exacerbated in recent months with the arrival of Covid-19 across Europe which has meant more consumers than ever have been shopping online, not only out of choice, but also out of necessity, ” said Marcus de Minckwitz, director of the regional investment advisory at Savills. “Although the end of Q1 has been quieter y-o-y from an investment perspective and, we predict, as well as the second quarter, we expect a strong recovery of the industrial sector driven by logistics transactions. As a result, and with retail being disproportionately hit by the pandemic, the spread between yields for logistics and shopping centers could increase further throughout 2020.”
