Investors face uncertainty

Logistics now ranks second in investors’ hearts, after residential and ahead of offices. “It is performing better than other asset classes,” notes François-Régis de Causans, Head of Industrial & Logistics Investment Properties at CBRE France. This relatively positive assessment, outlined at LogiDay on September 19, was nevertheless accompanied by a more unsettling overview of the broader context: since 2022, the European Central Bank has raised its key interest rates for the tenth consecutive time, setting its main refinancing rate at 4.5%, its highest level since 2001. “Money is no longer free, François-Régis de Causans comments. As a result, fundraising is more difficult for financing logistics real estate projects.” While waiting for this rise in key rates to curb inflation, prices have continued to increase, particularly for raw materials and energy, driving up construction costs. Another contextual factor is ZAN (Zero Net Artificialization), which raises questions about the location of future logistics facilities, even though the backbone corridor remains the sector’s preferred area. According to Arthur Loyd and JLL, just over €560 million was invested in the first half of 2023, compared with €2 billion in the same period in 2022. The machine has indeed slowed down... 

In this context, investors are making “choices” and may become “more selective as abundant funding comes to an end,” says Diana Diziain, deputy director of Afilog, at the LogiDay event. During the roundtables held on September 19, several solutions were mentioned: mixed use, vertical buildings and, more broadly, work to improve the acceptance of logistics activities in urban areas. “As investors, we must meet users’ needs, recalls Stéphane Bernard, Fund Manager Ullis at AEW. Proximity to consumer markets, the scarcity of land and rising land prices are therefore prompting us to consider taller buildings where several activities can coexist.” However, there are many obstacles to this type of construction: local urban planning schemes limit height to 15 meters, fire safety is complex, “and these buildings cost more,” Christophe Bouthors, President of Telamon, points out. As for mixed use, he believes that users would need to be offered many advantages before accepting the constraints of a multistory building they would have to share. ZAN, along with the introduction of low-emission zones, could nevertheless encourage these operators to accept this type of construction in order to stay as close as possible to their customers and guarantee rapid delivery. Vincent Sadé, Prologis France’s Director of Leasing and Capital Deployment, meanwhile highlights the obstacle of local residents’ acceptance, with “customers who want to be delivered within two hours but do not want to see logistics buildings—especially not tall ones.” 

To make them acceptable, one possible lever is the decarbonization of real estate. Beyond that, becoming energy suppliers could give logistics stakeholders an additional argument to make to local residents and users. Some are even convinced that this transformation will create financial value, with profitability prospects commensurate with the challenge. Reduced charges for tenants could generate budget savings that would make it possible to negotiate higher rents (a 2023 CBRE study notes that certified office buildings command higher rents and have lower vacancy rates, and cites a 6% rent premium). At this LogiDay, Christophe Bouthors said he was “installing the largest photovoltaic plants possible. This enables us to claim a carbon-neutral footprint across the building’s entire life cycle, without having replanted a single tree.” He nevertheless warns of several points requiring attention, since the financial balance also depends on the location and size of the building, “as this type of installation requires additional construction costs.” 

To find land, some investors are betting on areas outside the historic backbone corridor (Lille, Paris, Lyon, Marseille). “We have invested in sites in Orléans, Beauvais and Rouen,” says Laurent Dubos, Managing Director of Logicor France, during one of the LogiDay roundtables. 

For Laurent Mary, Deputy Director General for Transport and Regional Planning at the Normandy Region, “professionals must heed new expectations and embrace intermodality, energy and land sobriety, while favoring value-added activities wherever possible.” Pierre Bergès, General Delegate in charge of developing the Seine-Nord corridor at the Hauts-de-France Prefecture, and Xavier-Yves Valère, Head of the Freight and Logistics Mission at the Ministry of Transport, also present at this roundtable, confirm that logistics stakeholders will indeed need to know how to persuade local elected officials who are sometimes reluctant to host these activities. “market forces can no longer be the only argument,” Xavier-Yves Valère explains. “Elected officials have become more demanding regarding developments and need convincing explanations of why the logistics project serves the general interest of both their constituents and the local economy.”