Jones Lang LaSalle: First Signs of Reversal on Industrial & Logistics Market in Spain

3/03/2014 – Jones Lang LaSalle

The Report on Industry and Logistics (El Informe de Industrial y Logística) by Jones Lang LaSalle analyzes movements within the sector underlining the lack of significant purchase transactions due to the fact that the cut-off in financing undermined the sector. Nonetheless, according to the report, the year 2014 casts positive outlook inasmuch as on the one side the country risk faded away, we think that the yield hit the bottom, therefrom recovery shall be imminent and finally, the returning international investors who start to demand new industrial plants that implies creation of new spaces.

Madrid´s industrial area and land

The demand from the part of small and medium-size businesses is scarce due to serious insolvency and financing problems. However, the ones that are powerful enough to buy the industrial plants come across considerable opportunities.

When it comes to supply, the price of finished product shows the impact of continuous decrease, let alone the interesting assets proceeding from arrangements with creditors.

Land purchase presents poor numbers, basically due to lack of demand. At present, we find a wide offer of outstanding land at an attractive price in all rings.

On the other hand, some developer companies are willing to buy and develop land for tender finalists, however the terms and conditions offered by the lattest in agreements make accomplishment of the projects impossible.

Logistics in Madrid

The demand in Madrid has not got back on its feet as companies still cannot afford vacant spaces. In the primary areas availability is scarce (7.5%) and that pushes investors to surrounding areas. The demand aims at the second and the third ring, where availability rate demonstrates 9% and 42% respectively.

Jones Lang LaSalle´s report also analyzes supply and assures that the availability rate remains stable in the second quarter of the year, however shrinking number of large industrial buildings is noteworthy. In the second and third ring there are lots of obsolete property in need of low-cost trading.

In the primary zones, we observe an improvement in rental fees (4,80€/m2), whereas in the second and the third ring the prices reach 3,10€/m2 and 2,15€/m2 respectively. (…)

Talking about transactions, high-quality and well-situated demand turns towards 2.000-3.000 m2 in all facilities areas. The logistic space absorbtion in Madrid during 2013 showed 355.190 m2. (…)

Industrial product and land in Barcelona

Demand analysis in 2013 presents prectically no significant operations within this area, although the demand in Barcelona´s surroundings is high and supply low. (…). Still, financing is scarce, so most of the transactions are paid from own resources. The land prices ranged between  150€/m² and 400€/m².

Demand for industrial buildings is also poor, not in primary zones, though, where prices vary from 3,50€/m²/month and 5,25€/m²/month.

Logistics Barcelona

In the last quarter of the year, the absorbtion of logistic space was equal to 106.200 m² that added to the 205.000 m² from the previous quarters give 311.200 m² throughtout 2013.

The supply of industrial buildings in Barcelona is currently set at 672.300 m², about 6% less than a quarter before and the availability rate is 10.7%. Within primary zones, the rate shows 10%, whereas in the second and the thrid ring represent 7.2% and 15% respectively.

Maximum rental rates in the last months of 2013 showed 6,25 €/m²/month in the primary zones and 5 €/m²/month and 3 €/m²/month in the 2nd and 3rd ring, respectively.

The greatest transactions of the year are the following: Docout´s renting an industrial building of 22.848 m² from Prolongis and the rent of old buildings of Ochoa in L’Hospitalet del Llobregat, Cornellà del Llobregat, El Prat del Llobregat and La Bisbal del Penedès, at a tender sale.

 Investment market: Industrial and Logistic

The year 2013 was a turning point for the sector. The most active, opportunistic investors are continously looking for great volume and bargains.

Primary yields in Madrid showed 8.25% (expected to fall sharply during 2014 due to strong investment and long-term contract signing), while in Barcelona they settled at 8%.

The report by Jones Lang LaSalle highlights that the year 2013 ended up with €100 million investment and throughout 2014 the number might even triple. (…). Since the beginning of 2014, we observe improvement in activity within the sector and we expect better contract signing rates this year.

Original article: Jones Lang LaSalle

Translation: AURA REE