From sheds and beds to sheds with beds?

Sheds and beds – broadly speaking logistics and residential asset classes – are proving perennially lucrative investments in Western Europe in the current market, both when considered separately and, more recently, when approached as an integrated offering. Whilst the alternatives sector is certainly experiencing successes, these assets require a highly specialist approach that is not necessarily suited to all investors. Similarly, offices are performing well, with London and Warsaw in particular standing out as the winners of the last 12 months. However, office investments are a continuum, which again is not suited to all investment strategies. Retail in the traditional sense is being phased out, so capital which once was allocated to the high street is now being deployed elsewhere. The logistics and residential sectors are therefore championing the market in Western Europe currently offering investors good returns and steady income.

The logistics sector has benefitted from changing consumer patterns for some time now, as shoppers increasingly make discretionary purchases on the internet rather than the high street. The Nordics have been offering particularly competitive returns, specifically Gothenburg and Orebro in Sweden, where there has been huge demand recently. The logistics market in Poland is also performing well, bolstered by significant investment in infrastructure. As revealed in a recent report by Savills, Poland is set to receive EUR 7 billion investment in real estate in 2019, the largest increase in Europe.

Residential assets continue to perform well in all major cities of Western Europe where the onus continues to be on the urgent need to build more homes. Berlin in particular has been the success story of the last 12 months, with Knight Frank analysis revealing the city as the world’s fastest growing residential market last year.

Of course, beds and sheds are not autonomous asset classes. A fascinating report by SEGRO showed that from 2010-2015, 7.1% of London’s industrial land was released for non-industrial use. With highly ambitious targets for building more homes in the capital, it is important not to forget that residents of London also require the services provided by logistics centres built on industrial land. Recently, some interesting new examples are emerging of ‘sheds with beds’ – mixed use developments incorporating both logistics and residential space – with the latter suited particularly well for student accommodation. It is still too early to make any conclusions on the success of such plans, but the fusion of the two uses is certainly a trend to watch.

Both GPs and investors interested in our thoughts on logistics and residential investments should contact us on info@realasset.com or 020 3167 3380.