The international real estate advisor estimates that total capital raised by global logistics funds in the year-to-date has also reached US$69.5 billion, as investors remain willing and able to underwrite new deals, given the strength of I&L’s long-term fundamentals, even with more conservative rental growth expectations forecast as industrial occupiers become more cost-conscious.

Savills says that the I&L sector has led the way in terms of commercial real estate price recovery and has returned an annualised 11.7% since the end of 2019, according to MSCI, compared with an all-property average of just 3.5%. This has attracted major scale investors which have driven portfolio and M&A activity in 2024, according to Savills, supporting overall transactional activity. As a consequence, Savills reports that prime benchmark yields are beginning to harden across core US markets, as well as in some European markets, including London, Madrid, and Île-de-France, and the majority of markets, outside APAC, are expected to see further downward pressure over the next 12 months as interest rates come down.

Looking at the individual global regions, Savills says that EMEA I&L investment turnover had risen 32% year-on-year by the end of Q3 2024 to $US10.6 billion, with 67% of investment backed by cross-border investors, the highest proportion since 2017. In the US, I&L investment fell by 1.3% on the year to US$22.9 billion, despite annual growth in the value of assets being much stronger than other real estate sub-sectors, while APAC I&L investment rose by 9.4% year-on-year to US$11.6 billion, with the share of cross-border investment reaching 39.8% - the highest in nearly a decade.

Oliver Salmon, Director - Global Capital Markets, Savills World Research, comments: “The macroeconomic backdrop is relatively positive for the I&L sector, underpinned by solid trade growth and a recovery in consumer spending. While occupational demand in some markets remains muted, sentiment among tenants is definitely improving, especially in EMEA, as evidenced by our autumn 2024 European Logistics Census, with the balance of respondents expecting to be in expansion mode for the next 12 months. Investors retain strong conviction in the long-term fundamentals of the sector, and we continue to see major deals complete. The list of top I&L buyers over last 18 months has been a ‘who’s who’ of real estate capital markets.”

Rasheed Hassan, Head of Global Cross Border Investment at Savills, adds: “Q3 has built on the green shoots of activity seen in Q2 as more I&L vendors have come forward and lot sizes have quickly increased. Although the pace of recovery varies between regions, the increase in investor scale has brought with it a base level of portfolio and M&A activity, with at least one I&L transaction in each global region breaching the billion-dollar threshold in Q3. 2025 is set to bring with it hardening yields in the sector and a further uptick in activity.”

Read more here: https://resources.savills.com/gcm-q3-2024-logistics/p/1