Berenberg bullish on life after Amazon for listed logistics
Equity analysts at Berenberg say concerns about the outlook for publicly quoted logistics owners have been “overdone”, even in the face of dwindling demand from one of the market’s most high-profile occupiers.
The listed logistics market has been rocked over the past week, since Amazon said in an earnings statement that it is likely to put the brakes on its rapid take-up of real estate. In the UK the company has gone from accounting for a quarter of warehouse take-up in 2020 and 2021, to roughly 3% over the first quarter of this year.
However, with that first quarter nonetheless posting record lettings, company bosses have moved to quash any concerns that activity has peaked. In a note published on 6 May, Berenberg’s Tom Horne and Kieran Lee said they held a roundtable discussion last week with management teams from SEGRO, Urban Logistics REIT and Tritax EuroBox.
Equity analysts at Berenberg say concerns about the outlook for publicly quoted logistics owners have been “overdone”, even in the face of dwindling demand from one of the market’s most high-profile occupiers.
The listed logistics market has been rocked over the past week, since Amazon said in an earnings statement that it is likely to put the brakes on its rapid take-up of real estate. In the UK the company has gone from accounting for a quarter of warehouse take-up in 2020 and 2021, to roughly 3% over the first quarter of this year.
However, with that first quarter nonetheless posting record lettings, company bosses have moved to quash any concerns that activity has peaked. In a note published on 6 May, Berenberg’s Tom Horne and Kieran Lee said they held a roundtable discussion last week with management teams from SEGRO, Urban Logistics REIT and Tritax EuroBox.
“We left the call bullish as – while the risk to growth for the sector has increased in the face of slowing online sales, characterised by Amazon’s comments, a higher inflation environment, and slowing yield compression – we think a significant opportunity remains, underpinned by numerous structural tailwinds,” said the duo.
“Indeed, e-commerce tailwinds are far from complete, structural under-supply is expected to persist, and highly affordable rents on flexible industrial space remain conducive to further occupier demand and rental growth.
“We believe that these factors, in addition to ESG-efficient assets, make the sector significantly more resilient and defensive than in the past. As a result, we expect the sub-sector to continue to generate sector-leading rental growth and total returns.”
Horne and Lee added that the stock price falls over the past week now offered “a standout buying opportunity”, singling out SEGRO, Tritax EuroBox and Industrials REIT as “particularly good opportunities”.
They noted that UK supply of warehouses is at a record low – 16.8m sq ft as of the end of the first quarter, down by 46% year-on-year.
“This equates to roughly five months of supply based on the five-year average in take-up, according to CBRE,” they added. “The 20.4m sq ft currently under construction is mostly prelet, which will keep availability low, while developers remain restricted by land scarcity, rising land prices, build cost inflation and planning delays.”
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