By Brenda Goh and Tom Bill
LONDON Dec 18 Owners of run-down warehouses on
the edge of European cities could be sitting on goldmines
because online shopping will force firms to seek distribution
sites closer to customers who think speedy delivery is the norm.
In an increasingly fierce market where the likes of Amazon
and Tesco pledge next-day or same-day delivery
in specific time slots, warehouse rents could rise 40 percent
over the next decade, property consultant CBRE said.
" Your industrial estate (near heavily populated areas) is
the high street of the future," said Jonathan Holland, senior
manager of Legal & General Property's industrial fund, which has
770 million pounds ($1.25 billion) under management.
"We are very much looking at owning warehouses around major
Some 43 percent of European Union citizens shop online, the
European Commission said in February, up from 26 percent six
years ago. They were expected to fuel a 12-15 percent growth in
online sales across the region over the next five years,
Forrester Research predicted.
Meanwhile, falling sales in austerity-hit Britain have
forced retail property values down 28 percent since end-2007,
data from Investment Property Databank showed. Values in euro
zone countries fell 5 percent over the same period, CBRE said.
The yield, or annual rent as a percentage of the property
value, on an industrial warehouse in a good location in Europe
was 7.8 percent at the end of September compared with 5.8
percent for offices and 5.2 percent for shops, CBRE said.
Industrial yields depend more on lease length and the
financial strength of the tenant than location, compared with
offices or shops, and would "edge downwards" where demand from
retailers was strong, CBRE said.
Retailers currently favour large sites in locations away
from big population centres but with good transport links.
Amazon's huge warehouses include sites in Dunfermline,
Scotland and Rheinberg, Germany while Marks & Spencer
will open a warehouse the size of 11 soccer fields in Castle
Donington, Leicestershire, next year.
That is changing, said Amaury Gariel, managing director of
CBRE's European industrial logistics team.
Places such as Croydon, 16 kilometres south of central
London, strewn with empty office blocks and suffering high
unemployment, and Créteil, a scruffy suburb 19 km southeast of
Paris, are examples of areas that could be targeted as they are
close to major highways and large local workforces, Gariel said.
Warehouse rents at such sites could rise 20-40 percent over
the next decade, he said, citing the greatest demand in areas
near the biggest E u ropean cities such as Amsterdam, London and
Paris for sites that have typically been used by mail delivery
firms and food distributors.
A tendency by governments to prioritise such areas for homes
would squeeze supply and push prices higher, he said.
Retailers and property investors are at "a tipping point" in
waking up to the changing real estate map for distribution
points in Europe, Holland said.
Amazon is on the hunt for about 20 sheds close to British
cities while Asda and Tesco are opening so-called 'dark
stores' - distribution centres which look like supermarkets on
the inside but are closed to customers - across Britain.
Industrial developer Prologis has bought a
significant number of such sites near large towns and cities,
such as Milton Keynes in Britain and Hannover in Germany, t o
meet future demand, European president Philip Dunne told
Retailers face obsolescence unless they recognise how the
type of property they rent needs to change, Gariel said.
"We are on the first page of the story regarding new ways to
distribute goods. What happens if retailers do not recognise it?
Just look at what happened to the fax and the telegram."