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The meteoric step of the logistics market and the increase of costs

By Eleni Botas

Cracks in the logistics market, one of the fastest growing real estate sectors that attracts the interest of major market players, have been recorded in recent months.

The increase in construction costs combined with the increase in the value of the land by 50%, has led to a decrease in yields as written by Capital.gr with the situation deteriorating due to the effects of the war.

At the same time, the large increase in the price of raw materials has increased by 33.33% the cost of construction of new logistics spaces with prices, from 450 euros per square meter to have climbed to 600 euros per sq.m.
Adding to the puzzle is the lack of raw materials, with the result that many ongoing storage investments are frozen until newer.

Yields have fallen to 7%

A few months ago, the returns of logistics in Greece ranged between 8.00 – 8.50%, while for some who had managed to place themselves at the beginning of the uptrend, the returns they secured were in double digits.

This picture, however, began to change last October with the yields moving marginally above or marginally below 8%, causing concern to market executives.

Today, the rate of return has fallen to 7% for good quality properties, while many see further compression, to “more European levels”, as they characteristically report.
It should be noted that a typical yield in Great Britain or Germany for privileged properties, ranges from 4.0% -4.5%.

Investment brake due to lack of materials

The problem observed in the development of new logistics centers is important not only due to the rising price of building materials but also the lack of raw materials.

The stocks of materials are already exhausted and no one proceeds with new orders, since they do not know either the prices at which they will receive, or the exact time of delivery of their order.

“There is a shortage of raw materials in the market and no supplier is taking the risk of bringing new materials at this stage,” said Thanasis Tsokas, President of Web Construction, one of the largest companies specializing in the design and construction of Industrial Buildings. , Warehouses and Commercial Business Buildings.

According to him, “this results in us not being able to commit to the time of completion of large projects, except for projects with a volume of work of 2 to 3 months”.

The shortages mainly concern shaped plates, piping, elevator motors as well as industrial cables, due to the problems that exist in the supply chain due to China, while iron stocks are also depleted as large steel mills around the world have rolled down.

Stoppage of work is also observed in many quarries, since the large increase in energy costs makes their operation unprofitable.

So what are the investments in the field of logistics that are facing a problem? According to market executives, all, to a different degree each.

The investments that are already in progress and close to completion, despite the problems, will be implemented, while those that had been launched, are postponed until the market situation is clarified, with the majority believing that this will not happen before the beginning of summer.

Source: Capital

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