Clarion Partners has been a leading real estate investment manager for more than 40 years, using the judgment of our experienced professionals as well as our proprietary research to design real estate investment solutions that create value and have the potential to deliver superior returns. We are distinguished by a performance-driven approach, long-term organisational stability, and a mandate of accountability to our clients.
With $83.5bn in total assets under management on behalf of more than 500 institutional investors around the world, Clarion offers a broad range of equity and debt strategies across the risk/return spectrum – from core/core-plus to value-add/opportunistic. The firm, which is headquartered in New York, has over 300 employees and maintains a presence in strategic markets across the US and in Europe. Our strength lies in a well-established network of experienced professionals who bring a deep knowledge of local markets to every investment decision.
As a subsidiary of Clarion Partners, Clarion Partners Europe (CPE) operates out of offices across Europe, including London, Jersey, Frankfurt, Madrid and Paris. CPE is supported by Clarion Partners’ scale, infrastructure, expertise and proprietary research, while operating separately with its own management and investment teams and remaining a truly European business focused exclusively on European logistics assets.
With a 17-year track record acquiring, managing, and developing high-quality logistics real estate concentrated around Europe’s largest and strongest markets, CPE is a partner of choice for businesses of all shapes and sizes requiring industrial space to meet rapidly evolving customer and consumer demand.
INDUSTRIAL: Pan-European Logistics Sector Outlook
Notwithstanding the recent deterioration in the global and European economic outlook following Russia’s invasion of Ukraine, the European logistics market continues to benefit from several longer-term trends that are likely to support its ongoing expansion and fundamentals in the years ahead, including:
- Continued growth of e-commerce: More and more consumers are shop- ping online and the global COVID -19 pandemic has dramatically accelerated this trend. The share of online sales in total retail sales in Europe is estimated to have increased to 18.2% in 2021, up from 12.0% in 2019.1 However, the e-commerce market of several European countries, especially in Southern and Eastern Europe, while maturing, remains undeveloped relative to that of other advanced Western nations like the US. With e-commerce requiring three times as much distribution space as traditional brick and mortar retail, Clarion Partners estimates that, even if e-commerce growth rates were to stabilise going forward, European logistics/distribution stock may still need to grow in total by 15–25% over the next five years just to keep up with e-commerce- related demand for space.
- Political risk and near/re-shoring: Political risk is increasing as the post- war international order is being challenged. Multinationals are taking steps to hedge against this risk by increasing inventories, diversifying their sourcing strategies and locating production closer to home shores. This trend may fuel new requirements for manufacturing and distribution space in Europe.
- ESG requirements and stock rejuvenation: The ESG agenda is contributing to phasing out older generation property and shifting demand towards modern facilities with superior sustainability credentials. Supply of these buildings, however, is in short supply – in the UK, for example, stock built after 2010 accounts only for less than 25% of total stock.2 These two factors are likely to support the case for new development going forward.
- Lack of land and negative public perception of logistics: Delivering this much-needed new space will be increasingly challenging due to lengthier planning processes, a growing lack of land for industrial/logistics use (especially around large urban conurbations), and the growing opposition to new logistics developments by municipalities keen to promote alternative uses instead.
Robust market fundamentals
Given the rapid expansion of the European logistics and industrial market, property fundamentals have been very strong, with record low inventory, and prime rents at all-time highs. Recent reports indicate low Class A vacancy and a general undersupply of modern warehouse inventory in many countries. In Q2 2022, the average European industrial vacancy rate fell to an all-time low of 2.5%. In the same vein, in the first six months of 2022, take-up reached an all- time high for H1 while prime rents grew at their fastest pace in decades in the 12 months to Q2 (+13.0%).3
Investor confidence in the market is well illustrated by the growing amount of capital committed to logistics and industrial assets in the region. At times of elevated inflation, the fact that most European logistics leases are pegged to CPI has contributed to reinforcing the appeal of the sector among investors. Through H1 2022, CBRE reported European industrial transaction volumes of €31.2bn, an all-time high. The European industrial market has continued to gain market share over the past years, rising from an average of 9% of total European commercial real estate investment in the 10 years to 2019, to 20% in H1 2022 according to CBRE. The rising cost of debt suggests investment may moderate in the second half of 2022 as buyers/sellers review their pricing aspirations.
Clarion Partners believes future growth prospects are now especially compelling throughout Europe given the post-pandemic e-commerce surge and less- mature warehouse and distribution property markets. According to Green Street Advisors, the outperformance of European industrial total returns relative to those of the other major sectors over the past several years is significant and bodes well for the industrial sector’s future investment outlook, as does the ongoing rise in institutional investors’ allocations to industrial assets.
Investment principles & strategy
Experience has taught us that attractive investment opportunities can be identified at every phase of the real estate cycle. Clarion Partners invests in high-quality assets across key property types in major markets throughout the US and specifically targets logistics facilities across Europe. We carefully screen each acquisition using in-depth research and rigorous due diligence, focusing on properties that compete effectively over time and are located in markets with consistent capital market liquidity.
Strategic corporate development
Clarion Partners offers investment options in both commingled fund and separate account formats for institutional investors. Clients can select from a broad range of debt and equity investment options to build their real estate portfolios, including diversified core portfolios, sector-specific accounts, core, core-plus and value-add products as well as opportunity vehicles. Going forward, we will continue to build our business by offering our clients real estate solutions that have been tailored to support their objectives and that capitalize on current market opportunities.
Certain funds in the US private equity sector measure their performance against NCREIF Property Index, the most widely used benchmark for private equity real estate institutional investments, as well as the NCREIF ODCE Fund Index. Investments in other real estate sectors measure performance against benchmarks specific to their sector and strategy.
1 Source: Centre for Retail Research
2 Source: Savills
3 Source: CBRE
Statements regarding forecasts and projections rely on a number of economic and financial variables and are inherently speculative. Forecasts relating to market conditions, returns and other performance indicators are not guaranteed and are subject to change without notice. There can be no assurance that market conditions will perform according to any forecast. Past performance is not a guarantee of future performance. Information contained in this report, including information supporting forecasts and projections, has been obtained or derived from independent third-party sources believed to be reliable but Clarion cannot guarantee the accuracy or completeness of such information. This is not an offer to sell, or solicitation of an offer to buy, securities. This information is intended for use by qualified recipients only.