CB RICHARD ELLIS MrketView Dutch Logistics www.cbre.nl/reserch Mrch 29 Quick Stts Tke-up Hot Topics Chnge from Q4 7 Q2 8 Yield Rent Yields nering pre-boom levels Prime rents rising Stronger demnd for bulk storge spce Food & spre prt distribution performing well Bred nd Almere strengthening their roles s inlnd hub OVERVIEW 28 Incresed demnd for bulk storge spce midst generl downturn Tke-up of distribution spce declined considerbly in 28, prticulrly in the second nd third qurters. However, n incresed demnd for storge spce for bulk commodities ws visible, minly in the port of Rotterdm. Supply conditions ese further Flling demnd nd continuing reliztion of new projects hve incresed the generl supply volume, lthough vcncy in existing spce remins low nd mostly ffects outdted property. Prime rent levels incresing The shrply risen yield levels re prompting developers of new sites to sk higher rents in order to mintin profit mrgin. This mechnism pushes up the prime rent level for logistics spce in the Netherlnds, which hve been stble for mny yers. Investment turnover collpsed, yields hve risen shrply 28 experienced rpid decline in investment volume, prticulrly in the second hlf of the yer, when lrge-scle cquisitions virtully disppered from the mrket. Consequently, yields rose further to mrk t lest 12 bp higher thn in the beginning of the yer. Substntil construction pipeline but no new specultive development A substntil number of projects re currently under construction, prticulrly in the province of Noord-Brbnt. Mny further plns for lrge-scle distribution sites exist, but no new specultive developments re being strted in the current economic climte. The new DC A15 (22,75 sq m), t Distriprk Eemhven in Rotterdm, ws sold to Schroders Eurologistics Fund nd prtilly let to Beelogic in 28. 29 CB Richrd Ellis B.V.
MARCH 29 MrketView Dutch Logistics MAINPORT THROUGHPUT The most importnt driver behind the Dutch logistics mrket is the trnsit of goods from the minports in the west of the country, most notbly the Port of Rotterdm nd Schiphol Airport. A strong blow for the sector ws therefore the sudden collpse in demnd for interntionl trnsport, which ppered fter the summer of 28. This is prelude for tougher times in the Dutch logistics sector, s mny logistics opertions in the so-clled trnsport corridor function s Europen distribution nodes for goods entering the minports. This corridor covers the southern prt of the country, nd contins mny hubs in the whole of the Noord-Brbnt province, the south of Gelderlnd nd the northern nd middle prts of Limburg. Ocen shipping rtes, reching record peks in the spring of 28, strted to fll rpidly in the reminder of the yer. The Bltic Dry Index, prime benchmrk for worldwide commodity demnd, strted to fll steeply from July onwrds, to rech bottom in the lst months of the yer. The freight rtes for continer shipment followed suit, to even rech zero on the importnt Asi-Europe route. The irfreight sector did not fre better. According to IATA, worldwide demnd for irfreight spce declined in the second hlf of the yer nd crgo trffic even dropped by 22.6% (yer-on-yer) in December, n unprecedented rte. In the first weeks of 29 the Bltic Dry Index strted to rise gin, s commodity stocks becme depleted nd hd to be replenished. Continer rtes were, however, still flling in the beginning of 29, nd irfreight volumes remined low. The Port of Rotterdm - Europe s lrgest - did not suffer noticebly in 28, lthough trnshipment volumes declined in the lst qurter. All in ll, the totl throughput in 28 ws higher thn in the yer before, nd this ws lso the cse for continer lods, the most importnt crgo type for inlnd logistics opertions. Rotterdm is still witing the blow nd predicts difficult 29 with lower crgo volume. The cooling economy hit erlier nd more hevily to the Dutch irfreight sector. Crgo trnshipment t Schiphol Airport - Europe s third in terms of irfreight hndling - lredy experienced decline in 28, with rpidly flling figures in the lst months of the yer. In line with the interntionl picture, the crgo volume in December fell lmost qurter yer-on-yer, the shrpest drop ever recorded. The Schiphol irfreight sector is therefore brcing for tough 29. RETAIL DEMAND The min indictor for the performnce of the ntionl distribution sector in the Netherlnds Pge 2 29 CB Richrd Ellis B.V. Bltic Dry (dry bulk) & ConTex (continer) Sefreight Rte Indices BDI 14 12 1 8 6 4 2 BDI ConTex feb-8 pr-8 jun-8 ug-8 oct-8 dec-8 feb-9 Continer Crgo Trnshipment in Rotterdm Air Crgo Trnshipment t Schiphol Airport x 1, ton Source: Bltic Exchnge & Hmburg Shipbroker s Assocition mln metric ton 12 1 8 6 4 2 Source: Port of Rotterdm 18 16 14 12 1 8 6 4 2 2 2 21 21 Source: Schiphol Group 22 22 23 23 24 24 25 25 26 26 27 27 ConTex 12 1 8 6 4 2 28 28 29e
Dutch Retil Turnover Growth Food Non-Food 8 6 4 % 2 (2) (4) (6) 21 22 23 24 25 26 27 28 is retil demnd, which fuels mny logistics opertions in prticulrly the middle of the country. Centrlly locted hubs s Utrecht, Almere nd Alphen /d Rijn/Wddinxveen re mostly bsed on this type of distribution, s re some regionl hubs in the northern prt of the country, such s Alkmr nd Heerenveen. Retil turnover in the Netherlnds still grew in 28, but in contrst to previous yers this ws lmost completely due to infltion, nd not to growing sles volumes. Moreover, cler distinction ws visible between the food nd non-food sectors. While the first one performed well, the ltter lredy experienced difficult times. Prticulrly supermrkets re still performing very well, while non-dily goods continue to suffer. MrketView Dutch Logistics Logistics Tke-up nd Supply x 1. sq m Source: Sttistics Netherlnds 1.6 1.4 1.2 1. 8 6 4 2 Logistics Mrket Rents Schiphol Rotterdm Amsterdm Utrecht Eindhoven Tilburg Almere Venlo Bred Moerdijk Nijmegen Tiel Veghel 21 22 3 5 7 9 11 Tke-up 23 24 25 26 EUR / sq m / yr Supply 27 28 29e TAKE-UP Erly in 28, logistics service providers lredy ppered to nticipte on flling product demnd in the second hlf of the yer, s tke-up of new distribution spce collpsed nd product stocks were horded up within existing opertions. As result, totl tke-up of logistics spce hlted t some 75, sq m in 28. This is lmost 4% less thn in the record yer 27. Prticulrly the second nd third qurters of the yer were quiet, s this hlf of the yer generted only one-third of the totl tkeup figure. In the lst qurter, demnd for logistics spce cught up gin, s storge spce rn out in certin plces. Some 4% of demnd ws trgeted to newly built logistics spce, underlining the upgrding nd consolidtion trend tht hs lredy been visible in the Dutch mrket for number of yers. The 28 demnd for spce minly lnded in the minports Rotterdm nd Schiphol Airport. Inside the trnsport corridor, the hub Bred performed very well. As suitble loction for Benelux distribution, the city nd its environs hve ttrcted mny newcomers in recent yers, lthough 28 tke-up ws minly fuelled by short-distnce reloctions. In the centre of the country, Almere is more nd more evolving into min hub for ntionl distribution. The loction proves to be good lterntive for the congested nd reltively expensive Rndstd re (i.e. the big four cities nd their environs). A strong demnd for wrehousing spce cme prticulrly from the commodity sector, which is mostly present in the ports of Rotterdm nd Amsterdm. Although most storge fcilities for bulk goods do not qulify s stndrd logistics property, there re notble new developments in this segment, such s the 7,-sq m Commodity Prk in Rotterdm, which ws recently tken up by logistics service provider Henry Bth. Pge 3 29 CB Richrd Ellis B.V. MARCH 29
MARCH 29 MrketView Dutch Logistics A min trigger for the incresed demnd for commodity storge is the drop in rw mteril demnd cused by the rpidly cooling Europen economy. SUPPLY Due to flling demnd nd the continuing reliztion of new projects, supply of distribution spce incresed in 28. However, the supply growth rte ws surprisingly modest, t only 6%, leding to totl supply of pproximtely 1.2 million sq m. It should be noted tht pprox. 35% of this totl supply concerns specultive projects still under construction. The ctul vcncy in the Netherlnds is therefore considerbly lower, stnding t n pproximte rte of 4%. Of this vcncy, only 15% concerns modern property, so tht most of the ctul vcncy concerns older, often outdted, wrehousing property. In the light of these fcts, the construction nd development pipeline of distribution spce does not pper to be disproportionl, despite the severity of the economic crisis. Nonetheless, locl imblnces might occur in regions with substntil volume under construction, most notbly the West-Brbnt region with lrge projects under construction in Bred, Bergen op Zoom nd Roosendl nd further lrgescle plns for Moerdijk nd Oosterhout. Truly outdted wrehousing property is often locted on (lso outdted) industril esttes close to city centres, mking it unsuitble for modern logistics opertions. These sites will incresingly be subject to redevelopment. RENTS A striking feture of the mrket in 28 ws the fct tht prime rents rose, while demnd ws declining. In recent yers, the strongly flling yields mde it possible to keep mrket rents stble, s the rising property vlues were ble to offset the rising development costs nd developers could use the stble rents s competitive instrument. However, the mrket brek t the end of 27 disturbed this process. With yields now rising, developers were forced to increse the sking rents in order to mintin their profit mrgin. As predicted erlier by CB Richrd Ellis, this mechnism hs pushed up the prime rent level for logistics spce in the country by some 4 to 5%. For older property, different picture previls. As more nd more new projects re being relized the supply of older, nd often outdted, property grdully rises. As the prime concern for owners of this type of property is the ttrction of tennts, Pge 4 29 CB Richrd Ellis B.V. Construction Pipeline Logistics Spce 1, sq m Prime Net Initil Yield % 1 mln 25 2 15 1 5 8,5 8 7,5 7 6,5 6 5,5 Logistics Investment Volume 8 7 6 5 4 3 2 1 West Brbnt 21 21 Tilburg region 22 22 23 23 Amsterdm 24 24 centrl Limburg 25 25 Tiel region 26 26 Schiphol 27 27 Almere 28 28 29e Utrecht E29
n incresing downwrd pressure on rents is visible in this sector. INVESTMENT Flling investor s demnd nd the cutting off of the chep supply of lon cpitl lredy led to grdully rising yields in the first months of the yer. After the summer, when the finncil crisis turned into generl economic one, it becme cler tht investment bsed on the boom yer price levels ws no longer sustinble, nd initil yields rose further. At the end of 28, the net initil yield for prime distribution wrehousing spce could be determined t round 7 to 7.25%, to rech mrk of pprox. 7.5% t the end of Februry 29. This is lmost return to the stble level of before the recent boom yers. Simultneously, the rpid growth in investment volume cme to n end in 28. Where 27 still recorded totl investment sum of pprox. 7 million, the volume in 28 hlted t bout 55 million, similr level s in 26. Most lrger dels were, however, concluded or decided in the first hlf of the yer, or lredy in 27. It ws striking tht, unlike in the office mrket, still mny specilized (foreign) fund mngers were ctive on the buy side. Exmples include Dek Immobilien, Grbe, Goodmn, Schroders, Achme nd Alter. After the summer, however, the number nd size of the dels fell rpidly nd currently, ny substntil investment ctivity beyond smller-scled locl dels ppers to be non-existent. OUTLOOK The logistics sector will doubtlessly continue to suffer from the contrcting economy, but the impct will not be equl to ll sectors. Food distribution is expected to keep stedy performnce, while spre prt distribution might even witness incresed product flows, s end users re prolonging product lifetimes in times of crisis. Additionlly, the ports of Rotterdm nd Amsterdm continue to profit from the need for extr bulk storge spce, resulting from lower commodity demnd levels. Despite generl lower demnd for logistics spce, the consolidtion of different opertions into one, modern nd optimlly ccessible wrehouse remins strong force behind the Dutch lesing mrket. As new specultive development is put on hold for the time being, this might gin led to scrcity of modern distribution spce in the Netherlnds. In the south of the country, inside the trnsport corridor, the hub Bred in prticulr is gining reputtion s mjor node for Benelux distribution, nd s such might be ble to ttrct dditionl Benelux opertions, lso in difficult times. For ntionl distribution, Almere continues to strengthen its role s n lterntive loction for both the Rndstd re nd the province of Utrecht, where lnd for new developments is scrce nd more expensive. MrketView Dutch Logistics MAJOR INVESTMENT DEALS 28 PURCHASER SIZE (sq m) MILLION DHL Exel Supply Chin S&LB; 7 sites Grbe 24, 118.3 Moerdijk, Trnsitoweg Dek-ImmobilienEurop 64, 43.9 Nijmegen, Almere; 2 sites Dek-ImmobilienEurop 45,525 38. Tilburg, Gesworenhoekseweg AMB 52,585 35.4 Veghel, Mrshllweg WDP 68,875 31.7 MAJOR WAREHOUSE TAKE-UP 28 TYPE STATUS TENANT/USER SIZE (sq m) Rotterdm Europoort, Commodity Prk Rotterdm Roosendl, Borchwerf Almere, Stichtse Knt Venlo, Trde Port West Amsterdm, Westhven Bulk Storge Distribution Centre Distribution Centre Distribution Centre Bulk Storge Second Hnd Henry Bth Cev Logistics Antlis Tommy Hilfiger Stor Enso Timber 66, 33, 29, 26,5 25, Born, Holtum-Noord, Distriprk Sittrd Distribution Cmpus Kuehne & Ngel 19,9 Pge 5 29 CB Richrd Ellis B.V. MARCH 29
MARCH 29 MrketView Dutch Logistics Initil yields hve now risen to level tht is nering the stble pre-boom vlues. Due to continuing uncertinty in the mrket, it is expected tht the prime yield will slowly rise further to level between 7.5 nd 8% (net), to probbly stbilize there. At such levels, logistics property seems to be fvourbly priced when historicl vlues nd the current interest rte levels re tken into ccount, presuming prolonged, defltionry depression scenrio is not pplicble. Demnd from specilized, prticulrly Germn, funds might grdully ctch up gin in the course of 29, s they continue to rise equity nd profitble investment opportunities emerge. Disclimer 29 CB Richrd Ellis Informtion herein hs been obtined from sources believed to be relible. While we do not doubt its ccurcy, we hve not verified it nd mke no gurntee, wrrnty or representtion bout it. It is your responsibility to independently confirm its ccurcy nd completeness. Any projections, opinions, ssumptions or estimtes used re for exmple only nd do not represent the current or future performnce of the mrket. This informtion is designed exclusively for use by CB Richrd Ellis clients, nd cnnot be reproduced without prior written permission of CB Richrd Ellis. Copyright 29 CB Richrd Ellis CB Richrd Ellis is the mrket leding commercil rel estte dviser worldwide - n dviser strtegiclly dedicted to providing cross-border dvice to corportes nd investment clients immeditely nd t the highest level. We hve 4 offices in 58 countries cross the globe, nd employ 24, people worldwide. Our network of locl expertise, combined with our interntionl perspective, ensures tht we re ble to offer consistently high stndrd of service cross the world. For full list of CB Richrd Ellis offices nd detils of services, visit www.cbre.com Pge 6 29 CB Richrd Ellis B.V. Trnsport Corridor : Europen Distribution Ntionl Distribution For more informtion regrding the MrketView, plese contct: RESEARCH Mchiel Wolters Hed of Reserch CB Richrd Ellis Stdhouderskde 1 154 ES Amsterdm t: +31 2 626 26 91 e: mchiel.wolters@cbre.com INDUSTRIAL & LOGISTICS Dries Cstelein Associte Director CB Richrd Ellis Stdhouderskde 1 154 ES Amsterdm t: +31 2 626 26 91 e: dries.cstelein@cbre.com Roelnd vn den Berg Consultnt CB Richrd Ellis Stdhouderskde 1 154 ES Amsterdm t: +31 2 626 26 91 e: roelnd.vndenberg@cbre.com