According to Savills, the average spread between prime industrial and prime shopping center yields across mainland Europe has converged for the first time in our historic series as demand for logistics and soars as a result of increased levels in e-commerce.
Data from the international real estate advisory shows that the historic average spread between prime shopping center and prime industrial yields was at 143bps until 2018, when it dropped to 108 bps, to 54bps in 2019. Then in Q1 2020, for the first time, prime industrial yields were 9bps lower than prime shopping center yields, at 4.95 percent vs 5.04 percent.
This rapid convergence has also been the result of a gradual softening of shopping center yields over the past two years, by 40bps.
According to Marcus de Minckwitz, Director in the Regional Investment Advisory Team, Savills EMEA, this convergence of prime industrial (mainly logistics) and retail (shopping center) yields reflects the shift of investor interest into logistics properties and away from physical retail, along with the rise of e-commerce and the growing demand for warehousing space by 3PL providers and retailers. This trend is one that has been exacerbated in recent months with the arrival of Covid-19 across Europe which has meant more consumers than ever have been shopping online.
“Current sentiment is that industrial yields will compress further and capitals values increase in the industrial and logistics market to the determent of other sectors. This trend was happening before the current pandemic and Covid-19 has acted only as a catalyst to accelerate the movement to industrial,” John Palmer, Head of Industrial Investment at Savills in Poland, said.