CONTRIBUTORS
Bruno Berretta
Research & Strategy
Clarion Partners
Executive summary
As the new European real estate cycle takes shape, we continue to see logistics as one of the more attractive investment propositions, underpinned by three pillars:
- Sturdy occupier fundamentals: Demand remains broad-based across markets and sectors, supported by the ongoing need for efficient distribution space.
- Positive investor sentiment and robust liquidity: Transaction activity has picked up, with logistics continuing to command a large share of institutional allocations.
- Long-term structural drivers: The expansion of e-commerce, adoption of ESG standards, and the modernization of supply chains all provide enduring support to the sector.
Economic risks have risen, but Europe’s economy has proved resilient to date, and the trajectory of monetary policy remains broadly favourable. Against this backdrop, we believe investors should focus on modern, high-specification assets—those increasingly favoured by occupiers for their efficiency, sustainability credentials, and technological readiness. In our view, these attributes will be critical for delivering liquidity and income durability through the next cycle.
As we discuss in this paper, European logistics remains underpinned by strong fundamentals and a resilient rental growth profile, providing a solid foundation for long-term performance. With asset values stabilising, liquidity improving, and occupier demand showing signs of recovery, we think this is an opportune time to allocate to the sector and capitalise on its enduring strengths.
To fully capture the opportunities of this cycle, investors should look forward—prioritising modern, newly-built facilities that deliver state-of-the-art distribution capabilities. As supply chains become increasingly technology-driven, a forward-looking logistics portfolio will be essential for both resilience and growth. We believe that the sector is at a turning point. Investors who align portfolios with evolving occupier requirements today should be best positioned to benefit from a recovery and secure superior long-term returns.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Past performance is no guarantee of future results.
Equity securities are subject to price fluctuation and possible loss of principal.
International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors.
Risks of investing in real estate investments include but are not limited to fluctuations in lease occupancy rates and operating expenses, variations in rental schedules, which in turn may be adversely affected by local, state, national or international economic conditions. Such conditions may be impacted by the supply and demand for real estate properties, zoning laws, rent control laws, real property taxes, the availability and costs of financing, and environmental laws. Furthermore, investments in real estate are also impacted by market disruptions caused by regional concerns, political upheaval, sovereign debt crises, and uninsured losses (generally from catastrophic events such as earthquakes, floods and wars). Investments in real estate related securities, such as asset-backed or mortgage-backed securities are subject to prepayment and extension risks.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.
WF: 7562312