Logistics property outperforms broader industrial market

Logistics property outperformed the broader industrial market by 90 basis points over the last three calendar years to end of 2009, according to research by BNP Paribas Real Estate and IPD.

The first-ever examination of the logistics market – based on a sample of 2,939 properties worth £18bn – reveals logistic assets delivered a three-year annualised total return of -6.8%, compared to -7.7% in standard industrial property.

In 2009, logistics total return was 8.5% – more than three times the return provided by standard industrials, which returned 2.6% and almost double the 4.4% delivered by all industrials. Logistics’ superior performance is attributed to its positive capital growth, at 0.3%, relative to the -5.0% capital depreciation recorded by standard industrials.

Logistics’ outperformance continued into the first half of 2010, albeit at more modest levels, with six month returns of 7.2%, 30 basis points higher than standard industrials’ 6.9%.

The report also reveals the regional variation in performance in 2009; with logistics property outperforming both standard industrials and all industrial assets in each region across the UK. The highest performing regions were the South West, with annual total returns of 12.5%, the West Midlands, at 10.8%, and the North West, which delivered 9.6%.

Kevin Mofid, associate director at BNP Paribas Real Estate said: “From the early 1990’s a distinction between these two industrial assets began to emerge; with logistics demonstrating a booming performance in the early 1990’s which stabilised to outperform standard industrial units. This index reached a peak in 2006 and over the course of the last three years has set itself apart from standard industrial assets.”

James Scott, research analyst at IPD, said: “This BNP Paribas Real Estate and IPD analysis highlights the differing performance trends of logistics assets and standard industrials. Across the UK, logistics properties outperformed both standard industrials and the broader industrial market in every region last year, with less of a south eastern bias than the standard industrial units.”

Paul Rixon, head of logistics at BNP Paribas Real Estate, added: “By utilising our extensive knowledge of the UK logistics property market we have been able to add transparency to the sector that previously was unavailable. We always suspected that logistics properties performed differently and we can now prove this, not just at a national level but in regional markets too.”