Kicking the tires in Europe
On the ground in Europe
Site visit to Italy, France, and the Netherlands
We recently went on a site tour with CERT to visit several of its properties in Italy, France, and Amsterdam. The tour gave us the opportunity to meet with independent market consultants, as well as the local teams managing the portfolios in these three markets that account for c.67% of CERT’s portfolio.
COVID-19 appears to be “a thing of the past”. Being physically on the ground in these three markets, we were pleasantly surprised by the bustling cities and influx of tourists. The COVID-19 outbreak in Europe felt like it was in the distant past as we saw troves of both locals and tourists lining up for attractions and splurging on retail and dining. As the sun only sets past 9pm in the evenings, due to the current transition into the summer season, the extended daylight probably keeps people out later everyday. The streets bustling late into the night drive optimism for retail and dining, and we believe business activities will only intensify as summer arrives.
Within CERT’s portfolio, the light industrial and logistics segments outperformed in the last two years amidst the COVID-19 pandemic. E-commerce, digital transformation, and the shifting habits of manufacturers led to the explosion in demand for high-quality light industrial and logistics properties, especially for assets that are strategically located. The entire European bloc shares a very rich history and large parts of European cities are being conserved. This makes property intensification and redevelopment very challenging or impossible in some cases. Active property investors like CERT have to constantly scour the markets to pick up on opportunities and identify the next locale to enter, as the cities gradually expand outwards. Having capable local teams also allows CERT to sniff out off-market deals that are typically initiated by private individuals and families. With capital continuing to pour into Europe and cap rates continuing to compress, market consultants believe that a value-addition strategy and off-market deals still present opportunities for attractive yields.
Europe on the forefront of ESG
Being on the forefront of ESG, properties in Europe are on a whole different level when it comes to environmental sustainability and renewable energy. Reduction of emissions and the zero-carbon footprint target is a concerted effort between both landlords and tenants. Instead of focusing on assets with a “green premium”, landlords and investors are now looking to avoid assets with a “brown discount”. High green ratings and minimal carbon footprints are now the norm that all tenants come to expect, and rather than paying a premium for properties with good environmental ratings, discounts are being applied to assets with low sustainability scores.