Executive Summary

Prime logistics continues to perform well globally, supporting a healthy capital investment environment with steady yield compression in most industrial hubs.

47 of the 63 markets tracked by CBRE Research have lower yields than in Q4 2017.

Strong interest in prime logistics assets continues in most industrial hubs due to robust market fundamentals, leading to $153.62 billion in total investment volume in 2018 (+5.3% year-over-year), according to Real Capital Analytics. Accordingly, 47 of the 63 markets in CBRE’s survey saw a decrease in prime logistics yields last year.

EMEA had the largest decline in yields year-over-year.

Prime yields decreased by an average of 35 basis points (bps) over the past year, with declines in most of the European markets. There were notable prime yield shifts in markets like Stockholm, which saw a decline of 75 bps year-over-year. The German hubs (Frankfurt, Munich and Berlin) and London had the lowest prime yields at 4.00%, down 40 bps and 35 bps, respectively. The weight of capital in EMEA is driving prime yield compression, with total industrial investment volume rising by 11% in 2018, according to CBRE.

Over half of the Americas markets experienced yield compression year-over-year.

The U.S./Canadian industrial markets continued to tighten, shedding an average of 24 bps off their prime yields. Limited new supply and rising rents drove capital to high-performing markets such as Seattle, Oakland, Los Angeles/Orange County, Inland Empire, New Jersey, Vancouver and Toronto—each of which recorded cap rates of between 3.75% and 4.25%. Tightening vacancy, robust tenant demand and rent growth continue to attract investors to industrial assets, resulting in more than $100 billion of investment in the Americas in 2018.

Investor demand for high-quality logistics assets in APAC remains robust amid lack of product.

Although total CRE investment volume for APAC was down by 10% year-over-year to US$126 billion in 2018, industrial volume remained stable at US$17.6 billion. With strong investment flow into the logistics sector, the average logistics yield fell by 16 bps year-over-year to 5.97% in 2018. The shortage of institutional-grade logistics product (10% of total regional property inventory) offers significant investment opportunities in the region.

Growth in investment activity should continue in 2019.

Given the abundance of institutional capital and the strong demand for logistics real estate in the global market, robust investment activity should continue in 2019 with some markets experiencing further yield compression.

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