Real estate investment in logistics warehouses declined in the first quarter of 2023, with registered volume reaching 272 million euros. Snapshot Logística | 1T 2023 was prepared by the real estate consultancy JLL.
The drop in investment was driven by several asset portfolios traded during the period. Between January and March 2022, up to 75% of the volume came from these portfolios. Excluding these portfolios, logistics investment volume in the first quarter of this year resembled the five-year quarterly average and surpassed the previous quarter by 50%. The consulting firm notes a continuation of planned activity, with 90% of investment managed by international funds, and core and core-plus entities accounting for the same share of transactions, reflecting the search for safer assets in the market.
Development of investment and primary profitability of logistics assets is highlighted in the accompanying data from JLL.
One notable milestone in the logistics market was a temporary slowdown in yield expansion, as investors priced for profitability at purchase. Current yields sit at 4.75% in Madrid and Barcelona, about 100 basis points higher than a year earlier, a shift tied to the ECB’s monetary policy actions.
JLL projects yields rising toward 5% by year-end and expects prices to stabilize. Each increase in the buyer’s required return at the asset level typically lowers the asset value and selling price.
What were the biggest operations?
One of the year’s largest moves involved a notable investor entering the market early in the year. While the exact amount was not disclosed, the deal included acquiring a portfolio that includes four logistics facilities leased to a major supermarket chain. A second sizable purchase was LaSalle Investment Management’s acquisition of a warehouse in Santa Perpètua de la Mogoda (Barcelona), leased to Daher Aerospace for 35 million euros.
Land transactions led activity in the first quarter. Notable deals included the sale of 2.5 million square meters of land in Seseña (Toledo) to EPSA Group, which plans to develop one million square meters in multiple warehouses, and 1.3 million square meters of land in Parc Sagunt II (Valencia) by Power-Co, the private battery unit of the Volkswagen Group.
What will happen in the next quarters?
International consultancies note a slowdown in investment activity due to the broader economic environment over the past six months. Although the first quarter of 2023 was stronger than the last quarter of 2022, predictions point to investment volume for the full year near the five-year quarterly average.
In the coming months, funds may re-enter the market with a more cautious posture, favoring lower-risk profiles. Market participants expect some deals to finalize in the second quarter as recent transactions provide clarity on price levels and help anchor expectations.
Logistics warehouse rental market
The rental market shows greater momentum than the asset sales market, though there are signs of softening in certain markets such as Barcelona. New lease activity in Madrid reached 200,000 square meters, down 56% from the prior quarter and 7% from the first quarter of the previous year. In Barcelona, new leases totaled 216,000 square meters, showing a similar level to 2022 with a quarterly decline around 10%.
The Catalan market is nearly fully occupied, with an availability rate under 3%, while Madrid runs around 6%. JLL anticipates that between 2023 and 2024 roughly 1.1 million square meters of new warehouse space will enter Madrid and about 283,000 square meters in Barcelona as construction progresses.
The cost of chartering warehouse space remains elevated in prime locations. Current rents are around 6.50 euros per square meter per month in Madrid, about 8% higher than a year ago, and 7.4 euros in Catalonia, up roughly 6%. These levels mark the strongest income indicators since 2009 and 2011, respectively.
Supply constraints, inflation, and slower new construction are expected to keep upward pressure on rents in 2023. While the pace of growth may be more moderate than in prior years, demand is anticipated to stay firm given ongoing uncertainty. The forecast points to roughly a 4% rent increase in Madrid and around 2% in Barcelona for 2023, with both markets potentially averaging an annual growth of 2.5%–3% over the next four years.