Meyer Bergman is creating a €2 billion platform allowing institutional investors to tap into surging demand for last-mile distribution centres, with the launch of Crossbay.
Industrial real estate has been one of the most popular property sectors over the last few years as retailers have adopted omni-channel formats and consumers have increasingly switched to on-line shopping. However, large warehouse occupiers remain sensitive to the economy – particularly for manufacturers of industrial goods.
However, Meyer Bergman’s last-mile logistics strategy is more insulated from GDP movements for several key reasons.
Developing new last-mile distribution hubs is extremely difficult, due to planning restrictions. Municipalities favour housing, exacerbating the current demand-supply imbalance.
Most goods distributed through last-mile hubs go direct to consumers – something likely to significantly increase post-COVID-19
Occupiers take long leases and pay a premium for the best locations because speedy access to customers gives them a competitive advantage
Headed by Marco Riva, who led more than €2 billion of deals while at Logicor (Blackstone’s big box warehouse business), Crossbay is the first pan-European real estate platform targeting single tenant assets in gateway cities.
Occupiers will benefit from Meyer Bergman’s global network of business partners, which includes many leading retailers, as well as the firm’s asset management expertise and specialist micro-market knowledge from its local teams.
While being a separate platform, Crossbay is an extension of Meyer Bergman’s urban mixed-use strategy which has managed more than €8 billion of assets across Europe. The company identifies value-add opportunities in core European locations, repurposing and repositioning assets to increase value. Meyer Bergman has increasingly diversified into different asset classes and has experience in managing €5.6 billion in gross development value (GDV) of residential property projects and €2.2 billion in GDV of office investments.
Including near-term pipeline, Crossbay already has over €500m assets under management, with properties in Italy, France, Germany, Spain, Belgium and the Netherlands. The portfolio enjoys an occupancy rate in excess of 97 percent and weighted average lease break of five years, with tenants being a mix of 3PLs (such as FedEx and DHL) and e-commerce brands (including Amazon).
Having recently secured assets in France and the Netherlands, Meyer Bergman is also targeting gateway cities in Southern Europe south such as Milan, Rome, Madrid and Barcelona. E-commerce penetration in Italy and Spain has lagged behind the UK and Northern Europe.
Additionally, Meyer Bergman is identifying opportunities in the Nordics and around London, where supply has been extremely restricted. Crossbay is on course to double its AUM to €1 billion over the next 12 months.
Growth in investor interest in urban logistics has been underpinned by an imbalance between demand and supply. Increasing urbanisation, the considerable growth of online sales and the reluctance of urban planners to permit the building of warehouses over homes has exacerbated this gulf.
Meyer Bergman is widely known for mixed-use schemes in core locations, such as London’s c.£1.5 billion Whiteleys project, which is held in a joint venture with CC Land, and its Promenaden portfolio in Oslo, Norway, which is 50 percent offices.
Marcus Meijer, chief executive of Meyer Bergman, said: “Demand from e-commerce, online grocery shopping and third-party logistics businesses has soared in recent years. This is a structural shift. Conviction investors rightly see a return premium given the lower level of risk in this property type coupled with continued growth in occupier demand.
“We are creating a long-term institutional platform that will work in parallel to our traditional value-add strategy. For the first time, pension funds will be able to access high quality assets, with grade A occupiers managed by an institutional-grade operator.
“Although we began our last-mile journey in 2018, COVID-19 has highlighted how integral urban logistics are to all aspects of life. As companies look to reassess their supply chains, we will see significantly enhanced investment targeting this area.”
Marco Riva, head of logistics at Meyer Bergman, said: “More than ever, retailers need to be close to their customers, so that is why tenants are willing to sign up to longer leases and pay competitive rents for well-located space. Last mile deliveries make up a significant proportion of retailers’ costs, and every mile and every minute’s delivery time creates expense.
“Online shopping will grow substantially across Europe, including in southern European markets such as Italy and Spain where e-commerce penetration has traditionally been lower. In addition, the just-in-time inventory models that failed to adequately supply consumers and governments during the COVID-19 pandemic will also be re-evaluated. This will all lead to a substantial growth in demand as Europe structurally realigns its retail and supply chain networks.”