As Oxford Properties Buys M7, Maybe It's Time To Ask If This Is A Stampede Into Urban Logistics
Could the surge in urban logistics investment be an example of herd mentality?
Patron Capital founding partner Keith Breslauer has wondered out loud about the capital markets' stampede into last-mile e-commerce units.
His warning shot comes as Oxford Properties agrees the £4.7B acquisition of M7 Real Estate, which becomes its primary European logistics platform.
Light industrial and urban logistics together with retail warehouses account for half the €4B assets currently under management at M7. The portfolio totals 45.2M SF.
“The industrial and logistics sector continues to be supported by significant tailwinds, with e-commerce penetration, evolving supply chains and the impact of technology on every aspect of society creating a supply and demand imbalance in all our markets," Oxford Properties Senior Vice President James Boadle said.
"Through this one transaction we gain access to a large-scale platform in M7, led by a world-class management team, that spans 14 countries and instantly scales up our European business in this important sector."
Oxford had previously stated its ambition to deploy £3B of capital into the European logistics sector, and the acquisition gives it immediate scale to do so.
M7 will continue to operate as a stand-alone business under the day-to-day management of the current leadership team, led by Richard Croft and David Ebbrell.
Breslauer said that ‘reflexivity’ gave the largest global investors the power to bend the market to stimulate investment demand and therefore drive asset prices up.
By betting on some sectors of the property market, big name investments in urban logistics like Oxford Properties and Blackstone were altering the investment environment. Blackstone has rapidly built up an €11B urban logistics portfolio in Europe, an investment drive that began in partnership with M7.
“They drive the market to believe something is a genius idea, so every schmuck and its brother piles into the sector, and values rise. They plant the seed, and that reflexivity is a very powerful tool,” Breslauer said.
“We bought an office park with three empty buildings because it was a crappy location for offices, but fantastic for urban logistics. We have already got 50% of the space spoken for logistics within a week because today, even the tenants are starting to panic that they need more urban logistics space. Everyone has started buying.”
The reality-changing volume of investment from some of the big players has increased confidence and sowed anxiety not to miss out, Breslauer said.
Driven by growing e-commerce demand, and by signs of a bullish attitude from investors, the UK market is certainly busy. Already this week Segro has unveiled plans to create London’s greenest urban logistics site with a 190K SF, nine-unit development in Tottenham. It plans to develop the scheme speculatively.
In a separate move, a former dairy in Acton has been acquired by Oxenwood Real Estate and its joint venture partner, Alberta Investment Management Corporation.
The deal with RSN Property Limited means the dairy will be relocated, and a new single-occupier 100K SF logistics facility will be built on the 4.7-acre site. The site is 30 minutes drive-time from Heathrow, and Oxenwood hopes to be able to sign a pre-let.
Meanwhile Valor Real Estate has acquired a portfolio of five Greater London urban logistics sites in a £50M deal.
The sites include a 105K SF unit in Weybridge, also within 30 minutes of Heathrow; a 17K SF small-bay, multi-let estate and an 18K SF single-let low-site-cover warehouse in Canning Town; a 40K SF single distribution unit in Sunbury; and a 10K SF single-let unit in Park Royal.
The long list of new arrivals in the urban logistics sector includes Kennedy Wilson and GIC, which entered into a $1B joint venture to acquire and manage UK urban logistics properties.
The JV was seeded with a $220M portfolio comprising 18 urban logistics assets in prime locations in the UK. The assets are currently wholly owned by Kennedy Wilson.
