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The Logistic Property Handbook 3.0Investment & Financing Keys
Spain 2018
Financial Advisory I Real Estate
April 2018
Executive Summary
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► 865,000 sqm brand new logistic GLA delivered in 2017 throughout the key market hubs (Madrid –51%, Catalonia – 39%, Valencia - 10% )
► Limited availability: Madrid´s vacancy rate plunged to 5,2% of the current logistic warehouses total inventory thanks to highest annual take-up in the last decade (890,000 sqm). The obsolete and outdated vacant space is not being accepted by “Grade A” tenants, who are opting to develop ad-hoc turnkey projects and speculative schemes.
► Catalonia has proved to be resilient to the political uncertainties as absorption remains at healthy figures around 500,000 sqm in 2018 despite falling by 37% compared to the all-time record of 2016.
► Rents have levelled off in prime locations while peaking up in secondary rings such as Illescas, Cabanillas and Torija close to Madrid, Tarragona locations in Cataluña or Sagunto in Valencia.
► GDP growth: +3.1% 2017 (+2.5% 2018F).
► Unemployment rate decreasing by 6.9% (CAGR) since 2013.
► Spain exports growth: +9.0% (CAGR) since 2009.
► Increase in Business Confidence Index: +3.0% YoY Var.
► Despite the relevant growth of B2C business (+50% from 2014 now) e-commerce is having an strong impact on profit per delivery, squeezing margins. “The Last Mille Challenge”.
► E-commerce operators accounted for 43% and 21% of 2017 logistic take-up respectively in Madrid and Catalonia.
2Supply &
Demand
3LogisticInvestment Market 5 Key Investment
Indicators
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Market Overview1
Strong growth but some uncertainties remain due to the
“last mille” approach
► Worldwide logistic warehouses investment grew by 17% in 2017. Activity is being led by permanent capital players who are conducting build-up strategies.
► EMEA investment allocation accounts only for 18% of worldwide activity, while Americas represents 63%
► Despite Spain´s transaction volume climbed by 75% YoY, Spain´s specific weight within Europe investment activity was only 13% in 2017. Capital Values in Spain grew by 9% on a year basis.
► There is currently an investment pipeline in Spain of €980m expected to be traded in the following months. Forward funding structures are being undertaken by investors who are targeting double digit returns.
4Financing Activity
Key Indicators by areas in 2017
Rent (€/sqm/mth) Cap. Value (€/sqm)
Madrid Catalonia
PRIME
C.Value
1,285
1,100
850
575
Rent
6.20
5.25
4.50
3.25
1st Ring
2nd Ring
3rd Ring
Valencia
C.Value
1,420
1,300
900
525
Rent
6.75
6.25
4.75
3.10
C.Value
780
650
445
n.a.
Rent
4.25
3.50
2.60
n.a.
► Spanish traditional banks are still reluctant to finance logistic warehouses on a general basis. Foreign lenders are taking advantage of the lack of real competition.
► Costs of borrowing are not as attractive as for other yielding commercial real estate segments.
► ING, Caixabank, Credit Agricole and Natixis are the most active senior loan facilities providers so far for this asset typology.
► Alternative capital providers eager to structure junior or mezzanine financing tranches.
3 of 154
Source: Deloitte
Source: Deloitte
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Key Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Inventory (mill. Sqm) 4.92 6.00 6.96 7.44 7.50 7.68 7.80 7.86 7.86 8.20 8.50 9.00
Vacant Space (mill. Sqm) 0.2 0.2 0.7 0.9 1.0 1.3 1.2 1.1 0.9 0.7 0.6 0.5
Vacancy Rate (%) 4.5% 3.9% 10.5% 12.7% 12.7% 17.0% 15.0% 13.9% 11.8% 9.1% 7.0% 5.2%
Prime Rent (€/sqm/month) 6.75 7.50 7.25 7.00 5.50 5.25 5.10 4.75 5.00 5.75 6.20 6.20
Take-Up (sqm) 575,000 540,000 540,000 450,000 240,000 360,000 310,000 285,000 395,000 380,000 404,000 890,000
Prime Yield (%) 6.00% 6.50% 6.75% 7.50% 7.75% 7.75% 8.50% 8.50% 7.75% 7.00% 6.25% 5.80%
Prime Capital Value (€/sqm) 1,350 1,385 1,290 1,120 850 815 720 670 775 985 1,190 1,285
Key Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Inventory (mill. Sqm) 3.93 4.01 4.01 4.09 4.13 4.18 4.18 4.22 4.26 4.50 4.80 5.00
Vacant Space (mill. Sqm) 0.18 0.16 0.36 0.41 0.36 0.33 0.25 0.34 0.38 0.23 0.19 0.19
Vacancy Rate (%) 4.5% 4.0% 9.0% 10.0% 8.8% 8.0% 6.0% 8.1% 9.0% 5.0% 4.0% 3.8%
Prime Rent (€/sqm/month) 8.00 8.90 9.00 7.00 6.00 6.25 6.00 6.75 6.00 6.25 6.75 6.75
Take-Up (sqm) 240,000 210,000 160,000 180,000 230,000 340,000 370,000 320,000 315,000 520,000 780,000 450,000
Prime Yield (%) 6.00% 6.50% 6.75% 7.50% 8.00% 7.75% 8.00% 8.00% 8.00% 7.25% 6.25% 5.70%
Prime Capital Value (€/sqm) 1,600 1,645 1,600 1,120 900 970 900 1,015 900 1,035 1,295 1,420
Key Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Inventory (mill. Sqm) 1.15 1.38 1.45 1.50 1.51 1.51 1.52 1.52 1.52 1.52 1.52 1.59
Vacant Space (mill. Sqm) 0.13 0.17 0.26 0.27 0.24 0.19 0.17 0.09 0.09 0.06 0.05 0.05
Vacancy Rate (%) 11.0% 12.0% 17.8% 17.9% 16.0% 12.5% 11.5% 6.1% 6.2% 4.0% 3.5% 3.1%
Prime Rent (€/sqm/month) 4.75 5.00 4.00 3.50 3.10 3.00 2.95 3.10 3.25 3.50 3.75 4.25
Take-Up (sqm) 73,000 82,000 105,000 26,000 100,000 115,000 145,000 126,000 140,000 122,000 100,000 162,000
Prime Yield (%) 5.75% 5.50% 6.00% 7.50% 8.50% 9.00% 9.50% 10.00% 9.00% 8.00% 7.25% 6.50%
Prime Capital Value (€/sqm) 990 1,090 800 560 440 400 375 370 435 525 620 785
Key Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Logistic Investment
Volume (mill. €)500 800 750 103 150 279 88 120 596 674 930 1,630
MADRID
CATALONIA
TOTAL SPAIN
VALENCIA
Key Performance Indicators Historical Analysis – 10 year basis
Si-20 Logistic PlatformCabanillas del Campo
Prologis Park ValenciaRibarroja
Mango Offices and Logistic Centre Palau de Plegamans
4 of 154
Lisbon Barcelona
OsloStockholm
Viena
Warsaw
Budapest
Copenhaguen
Rome
Dublin
London
Madrid
Milan
AmsterdamBerlin
Munich
PragueBrussels
Rotterdam
Paris
Source: European Commission
TRANS-EUROPEAN TRANSPORT NETWORK // TENT-T CORRIDORS
Baltic-AdriaticNorth Sea - BalticMediterraneanOrient / East Med
Scandinavian - MediterraneanRhine - Alpine
AtlanticNorth Sea - Mediterranean
Rhine - Danube
Oferta y
demanda
Lecciones
aprendidas y
perspectivas
Commercial
Investment Europe and Spain
Supply
and
DemandCRE Market
Spain 2015
EXECUTIVE SUMMARY
The Office Property Handbook 3.0Spain 2018
CityPrime Rent
Prime Yield
Capital Value
Min rent (Lisbon) 3.50 6.5% 650
Madrid 6.20 5.8% 1,285
Barcelona 6.75 5.7% 1,420
Max rent (London) 16.25 4.5% 4,360
European Logistic Market Uderstanding:
Source: Deloitte RE
PRIME CAPITAL VALUES (€/sqm)
PRIME RENTS
(€/sqm/mth)
4.9
9.0
3.4
4.5
3.2
4.7
16.5Max
Min
Avg.
7.0Max
Min
Avg.
6.75Max
Min
Avg.
PRIME YIELDS(€/sqm/mth)
4.5%
5.0%
4.7%
5.2%
5.8%
6.5%
5.3%Max
Min
Avg.
6.0%Max
Min
Avg.
8.25%Max
Min
Avg.
1,260Min (Rotterdam)
4,360Max (London)
2,210Avg.
920Min (Milan)
1,820Max (Munich)
1,215Avg.
650Min (Lisbon)
1,420Max (Barcelona)
915Avg.
Transoceanic Transportation Nodes Main European entrances Powerful economic environment Over-warmed Real Estate Market High purchasing power
Central-European transportation Main Railway and road routes Main economic hubs in Central Europe Goods transportation towards
Mediterranean routes.
North Sea - Baltic
Central Europe
Mediterranean
Spain within Europe:
Ending destination from European routes. Intra-Mediterranean transportation. Connections to North Africa
Mediterranean corridor becomes key Understanding of the role of European corridors within a global integrated logistic platform
Source: Deloitte
5 of 154
Oferta y
demanda
Commercial
Investment Europe and Spain
Supply
and
DemandCRE Market
Spain 2015
EXECUTIVE SUMMARY
Europe has experienced a global yield compression since
2013 and now, which has resulted in significant increases in Capital Values, apart from the effect that
other market factors could have had such as the trend in rent.
The Logistic Property Handbook 3.0Spain 2018
Initial Yield European Chart:
Germany
Italy
Spain
UK
France
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
Spain growth curve could be levelling off Prime capital values and prime trend yield analysis
5%
7%
4%
8%5%
8%
7%12%
8%
13% 17%
0%
14%
0
500
1,000
1,500
2,000
2,500
3,000
0
Un
ited
Kin
gd
om
Fran
ce
Germ
an
y
Irela
nd
Neth
erla
nd
s
Sp
ain
Belg
ium
Au
str
ia
Ita
ly
Po
rtu
gal
Po
lan
d
Czech
Rep
ub
lic
Sw
ed
en
No
rw
ay
10 Year Bond
2016-2017(4rth April 2018)
1.18%▼43 bps
0.65%▲ 31 bps
0.90%▼ 6 bps
0.50%▲ 24 bps
0.73%▼ 20 bps
1.35%▲ 26 bps
1.79%▼ 48 bps
1.63%▼ 232 bps
0.77%▼ 2 bps
0.73%▲ 28 bps
3.15%▼ 28 bps
1.84%▲ 92 bps
0.69 %▲ 10 bps
1.88%▲ 23 bps
Prim
e C
ap
ital
Valu
e (
€/
sq
m)
315 bpsYield 2017 – Dif. 10 years bond
427 bps 400 bps 535 bps 460 bps 452 bps 548 bps 512 bps 421 bps 487 bps 285 bps 391 bps 481 bps 312 bps
Pir
me
Cap.
Valu
es G
row
th (
%)
2016-2
017
Cap. Value (€/sqm) 4,360 1,430 1,820 1,520 1,260 1,420 930 1,110 920 650 850 940 1,640 2,560
5%
2,500€
2,000€
1,500€
1,000€
500€
15,000€
Pri
me Y
ield
s T
rend (
%)
2016-2
017
0%
2%
4%
6%
8%
10%
12%
Min. 2007 Max. 2009 2016 2017
Source: Deloitte RE, Bloomberg
6 of 154
GDP GROWTH per country(YoY VAR.(%)
PRIME RENTAL
GROWTH per city
(YoY VAR.(%)
Oferta y
demanda
Lecciones
aprendidas y
perspectivasLecciones aprendidas y perspectivas
Commercial
Investment Europe and Spain
Supply
and
DemandCRE Market
Spain 2015
EXECUTIVE SUMMARY
The Office Property Handbook 3.0Spain 2018
Source: Deloitte RE, Bloomberg
Prime Capital Value(€/sqm)
OVERWEIGHTCASH-COW
UNDERWEIGHT
High
LowOverweight (Lack of product)
Underweight (Structural Oversupply)
Question
Cash-Cow(To yield)
Quadrant Understanding
CityPrime Rent2017
Prime Capital Value
2017
RentsGrowth
16-17
Madrid 6.2 1,285 0.0%
Barcelona 6.7 1,420 0.0%
London 16.5 4,360 0.0%
Oslo 11.0 2,560 4.1% ▲
Stockholm 7.5 1,640 -4.3% ▼
Rotterdam 5.3 1,260 1.0%▲
Lisbon 3.5 650 0.0%
Vienna 5.4 1,110 0.0%
Paris 6.0 1,430 1.0%▲
Milan 4.6 920 3.8%▲
Munich 6.8 1,820 1.2%▲
Representative Sample
High
?-7%
-5%
-3%
-1%
1%
3%
5%
7%
1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
European Investment Logistic MarketCapital Allocation Matrix: Are Madrid and Catalonia running their “last mille” of growth?
7 of 154
European Investment Logistic MarketSpain (€1,630m) accounted for 4% of total European logistic market investment volume
European Yields (2017):
For more information see CHAPTER 4 (Key Investment and Financing Drivers)
in the full report.
Source: Deloitte
CountryPrime Yield
2017Minimum last
10 years
Germany 4.50% 5.50%
Italy 6.00% 6.50%
France 5.00% 6.00%
Spain 5.70% 5.50%
UK 4.50% 4.25%
Belgium 6.25% 6.75%
Sweden 5.50% 5.75%
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY# Country Asset
GLA
(sqm)
Purchase
Price (€M)Buyer Vendor
1 United Kingdom future HS2 20,410 151 Department for Transport Derwent London
2 United Kingdom Sainsburys Hams Hall 72,773 119 Kiwoom Securities, KB Securities Co LtdChristian Vision Charity, IM Properties
3 United Kingdom DC Ocado 65,030 106 Tritax Big Box Morrissons
4 Spain Mango HQ 149,996 100 Invesco LLC Mango
5 United Kingdom DC Debenhams 68,440 99 Palmer Capital Partners, Gulf Co-operation Council (GGC)DVS Properties
6 Germany Zalando Warehouse 128,512 92 KWAP Goodman European Logistics Fund (GELF)
7 Spain Dia Logistics Platform (4 assets) 109,997 86 Blackstone Dia
8 Germany Sirius Business Park Munich 71,998 85 Fiduciary Capital GmbH Glenwick plc, Sirius Real Estate
9 United Kingdom LD10 10,405 85 Equinix (REIT)
10 United Kingdom DC Tesco Avonmouth 50,166 81 Roebuck Asset Mngmt, MG Non- Life Insurance, CWMANFU Mutual
11 United Kingdom Fort Halstead 92,900 80 Merseyside Pension Fund Hines RE Fund, RREEF UK
12 United Kingdom Kingsland Business Park 62,828 80 Legal & General Property SEGRO
13 United Kingdom The Birches 35,674 74 RLAM Ropemaker Properties Ltd
14 United Kingdom Accolade Park 81,009 73 IGIS Keller Group
15 United Kingdom Amazon distribution warehouse 92,900 72 Rasmala plc, KAMCO Tritax
16 United Kingdom BAE Crewe 32,515 68 KB Securities Co Ltd, Knight Frank David Samuel Properties
17 United Kingdom Kaiam Laser 27,870 68 II-VI Inc. Kaiam Laser
18 United Kingdom JVC Kenwood 23,310 61 Legal & General Property aAIM
19 United Kingdom Uplands Business Park 26,707 60 BlackRock Workspace Group Plc
20 United Kingdom Royal Mail Daventry 25,325 55 Tritax Big Box LondonMetric Property
43 Spain Carrefour's Logistic Platform 55,000 39 TH Real Estate Confidential
44 Spain San Fernando Phase II 59,999 38 Axiare Grupo Barral
49 Spain PP10 Leganés (2 assets) 34,967 35 UBS Invesco
50 Spain Centro Logistico de Ontigola 54,999 35 Barings GLL RE Partners
74 Spain DHL 51,776 27 GreenOak Banco Sabadell
76 Spain Farggi 33,999 25 Actual Capital Grupo Farga
81 Spain ECI Business Solutions & Bricor 34,999 22 TH Real Estate n.a.
83 Spain Mercadona and Kuehne & Nagel 27,095 19 Savills IM Ibercaja
85 Spain Conforama 10,900 18 Barings López-Real
86 Spain Eroski 28,999 18 Barings Deka Immobilien
87 Spain Zal Port Warehouses 51,987 16 Centro Intermodal de Logística S.A. (CILSA)Luri 6 S.A.
89 Spain Seseña's Logistic Platform 40,000 16 Meridia Capital n.d.
90 Spain 4 Warehouses 18,584 13 M&G Teka
94 Spain CBRE EIF Activos en el corredor Henares n.a. 12 CBRE GI n.d.
97 Spain Portfolio Goodman 22,000 8 GreenOak Goodman
98 Spain Portfolio Goodman 22,000 8 GreenOak Goodman
100 Spain Lear Corporation n.a. 7 Brunswick Real Estate, Grosvenor Group Holdings, KCREn.d.
TOP 100 logistic asset deals within the markets of:
• CIC acquires Logicor Portfolio €12.22bn (€652M located in Spain)
• GLP acquires Gazeley €2.40bn
Most relevant European logistic transactions:
Source: Deloitte
8 of 154
€151m €119m €106m €100m €99m
United KingdomUnited KingdomUnited KingdomSpainUnited Kingdom
European Investment Logistic MarketEuropean Main Logistic Transactions
VENDORDVS Properties
68,450 sqm
BUYERPalmer Capital
Partners
Future HS2
Logistic
BUYERDepartment Transport
VENDORDerwent London
20,400 sqm
SainsburysHams Hall
Logistic
BUYERKiwoom Securities
VENDORIM Properties
72,800 sqm
Mango HQ
Logistic
BUYERInvesco LLC
VENDORMango
150,000 sqm
DC Debenhams
Logistic
DC Ocado
Logistic
BUYERTritax Big Box
VENDORMorrissons
65,000 sqm
Mango HQ (Spain) with €100m of
Investment Volume was the main
transaction in Spain in 2017.
Source: Deloitte
Mango HQ
4% of the Total Logistic Investment
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Ireland0%
Belgium1%
Russia1%Norway
2%Poland
2%
Switzerland2%Italy
3%
Sweden4%Spain
4%
Netherlands9%
France13%
Germany21%
United Kingdom39%
Ireland
Belgium
Russia
Norway
Poland
Switzerland
Italy
Sweden
Spain
Netherlands
France
Germany
United Kingdom
1 Spanish transaction is included within the Top 5 European deals.
Source: Deloitte
9 of 154
Most active players expected to stay active in
2018:
CORE PROFILE DOMINATES:
Source: Deloitte
2016 2017
Source: Deloitte
(€m)Core 610 Value Added 320
(€m)Core 1,216 Value Added 379 Core+ 35
Debt Providers
NPL – DPO Specialists
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Core66%
Value Added
34% Core75% Core+ 2%
ValueAdded
23%
Equity INEquity OUT
Main Players: A new competitive map for a wide variety of value creation strategies
Source: Deloitte
10 of 154
150 279 88 120 596 674 930
1.630 750 576
519 607
932
2.702 2.145
3.090
1.460 1.056
544 807
2.520
5.313 4.895
2.295
644 687
365
867
2.297
1.894 3.769
3.168
1.467
591
571
751
2.242
1.263
660
651
4.470
3.189
2.087
3.151
8.587
11.845 12.398
10.834
-
2.000
4.000
6.000
8.000
10.000
12.000
2010 2011 2012 2013 2014 2015 2016 2017
Total (€m)
Retail High Street
Retail Shopping Centre
Offices
Hotels
Logistic
15%
Logistic Typology
+75%
Rest of CRE
85%
Retail High Street
Retail Shopping Centre
Offices
Hotels
Logistics
Top 10 Spanish transactions:
A total pipeline investment volume of €980m is expected to be traded in Spain
Source: Deloitte
Total Logistics investment volume
in Spain as at 2017: €1,630m
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Logistic investment gathers momentum while other segments start to fall
Investment volume in Logistic segment increased by 75%, while total Commercial Real Estate decrease by 13%. Logistic segment keeps growing due to its higher operating return and shorter maturity period required to exit.
Short Term Medium Term Long Term TOTAL
45%
€980m
35%
20%
# ASSET PRICE (m€) GLA (sqm)
1 Logicor Portfolio 652.01 999,976
2 GreenOak Portfolio 243.40 322,591
3 JV CBRE GI/Montepino 150.00 250,000
4 Dia Logistics Platform 86.00 109,997
5 Carrefour L.Platform in Ribarroja 38.50 55,000
6 2 Warehouses in San Fernando 38.00 60,000
7 Ceva Warehouse in Mad/A-4 35.00 56,000
8 2 Warehouses in PP10 Leganés 35.10 34,967
9 Warehouse in Quer 26.50 51,000
10 Logistic Centre in Vademoro 21.50 35,000
Source: Deloitte
11 of 154
Macro Economic Context Overview
1(1) Balloon can even reach 100% for investment grade tenants with long-term contracts. It is of outmost importance the underlying’s result for
both balloon and LTV conditions, so that when the period of mandatory fulfilment ends, the LTV would be near 0%.
Main
Conditio
ns
LTV
Upfront Fee
Spread
n/a n/a 50%
n/a n/a 125-175pbs
n/a n/a 250-300pbs
Framework
Main Players
Balloon n/a n/a 65%
Credit Access Constraints
Financing Upturn
60-65%
100-150pbs
200-250pbs
80%-100%(1)
2014 2015 20162013
Institutional Investors / Debt Funds
Banking / Insurance Companies
Alternative lenders
+
50-55%
100-150pbs
200-250pbs
80%
P&L reconstruction Restructure of the Financial Sector
Fundamentals improvement
Forward funding: Turnkey projects: limited
lenders
Senior Debt: Yielding assets: still
weak
MAIN DRIVERS FOR THE INCREASING LENDING APPETITE
Monetary Policy: QE, low funding costs, etc.
Excess of Liquidity: Increase in transactions
Entry of new sponsors
FINANCIAL SECTOR
MACROECONOMIC ENVIRONMENT
2017-18
REAL ESTATE INVESTMENT MARKET
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Financing Market still coldYielding assets: Lending activity remains weak despite the growing
investment appetite
Source: Deloitte
12 of 154
Substance concentrationSimplification of holding structures as a way to concentrate substance. Creation of investment platforms with qualified personnel and substance
Funding structureMore conservative funding structures with SHLs duly supported by complete TP documentation
Withholding taxesReinforced substance at platforms as to facilitate dividend WHT. Back-to-back borrowing to be avoided
Business rationaleOngoing monitoring and support of tax benefits being proportionate to business reasons deriving from the structure
12
34EXECUTIVE SUMMARY
Tax advisory is still key to be successful at exit.
Drivers of the increase in cross-border
investment:
Yielding Real Estate is still more attractive than Investment Grade Bonds
2
3
1
4
Yield compressions in most of the countries led to a significant growth of capital values
Accessibility to credit and more attractive financing conditions
Political and financial uncertainly in certain regions of Europe, but markets still responding well.
The Logistic Property Handbook 3.0Spain 2018
A more defensive tax environmentBEPS are making an impact on tax structuring strategies
Source: Deloitte
13 of 154Source: Deloitte
The lease contracts have responded positively to the market momentum, particularly in Core areas,
experiencing significant decrease in
rent free periods and cost
recoverability
THE KEY FOR SUCCESS
Source: Deloitte
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Average Rent Free Period –Prime/1st Ring(% / Total signed months)
2nd Ring
3rd Ring
2014 2015 2016Contract Duration (years)
Total Office Space leasedOffice (sqm) / Logistics (sqm)
2-3 5 5
Transfer of Property Tax and Community Charges to the tenant
80%
5%(Office sqm/
Warehouse sqm)
6(months)
3(months)
100% 100%
Main
Term
s
5% - 7%(Office sqm/
Warehouse sqm)
7-10%(Office sqm/
Warehouse sqm)
12% of Contract duration
14% of Contract duration
8% of Contract duration
10-12% of Contract duration
8% of Contract duration
10-12% of Contract duration
3(months)
5% of Contract duration
8% of Contract duration
10% of Contract duration
2017-18
2-3 (renegotiation)
5 (new product)
7-10%(Office sqm/
Warehouse sqm)
8% of Contract duration
10-12% of Contract duration
2-3(months)
5% of Contract duration
100%(Triple net)
Standard Leasing TermsLandlords maintain incentives to attract “Grade A” tenants.
Source: Deloitte
14 of 154
As a consequence of take-
up growth, vacant spacehas strongly dropped
triggering in Rental rises, specially in secondary hotspots
Average Rents Catalonia
Average Rents Madrid
vs
Avera
ge R
ents
tre
nd
IN
DEX
BA
SIS
10
0 (
20
13
)
Avera
ge R
ents
tre
nd
IN
DEX
BA
SIS
10
0 (
20
13
)
First ring Second ring Core Zone First/Second ring Third ring
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Third ring
GROWTH
CONSUMER CONFIDENCE
INDEX EXPENDITURE
BUSINESS CONFIDENCE
CREATION OF
COMPANIES
EXPORTS
UN-EMPLOYMENT
RATE
GDPGrowth
EFFORT RATES
Recovery of activity indicators is having an impact on rental increase,but… for how long?
Leasing Market
163
136
111
90
100
110
120
130
140
150
160
170
2013 2014 2015 2016 2017
129
117
112
90
95
100
105
110
115
120
125
130
135
2013 2014 2015 2016 2017
Source: Deloitte
15 of 154
Number of Years
Required to take-up the
total vacant space*
0.5
1.0
1.9
1.0 2.0
2.1 4.1
3.9 7.8
100
%
50
%
25
%
*
*Years that Market would need to occupy the total vacant space
according to the take-up in thebest, worst and average case of the
10 last years, considering 100%, 50% and 25% of Net Take-Up
Conversion ratio from gross
Take-Up to net Take-Up
465,000
465,000
465,000
240,000
450,000
913,000
Worst Case=Min. Take-up
Base Case=Av. Take-up
Best Case=Max. Take-up
Take-Up (sqm) Vacant Space (sqm)Low vacancy rate and high demand have
pushed the number of speculative
projects. Net rents of current stock will
be affected by the huge new supply
scheduled for the next years.
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Main future supply areasMadrid
Madrid vacancy absorption scenariosBreakdown analysis shows a lack of vacant supply in a short run
In the Base Case, the current logistic space in Madrid would beoccupied in 1 year, if considering 100% of net take-up.
While considering the 25% of the total take-up space in theBase Case, Madrid logistic market would need 4.1 years toabsorve the vacant space.
Marchamalo
Cabanillas
San Fernando de Henares
Alcalá de Henares/Meco
Getafe
Illescas
A-4
A-2
+20 new projects
+1.3m sqm…planned in the next 3 years
Source: Deloitte
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188,600
188,600
188,600
160,000
360,000
780,000
Worst Case=Min. Take-up
Base Case=Av. Take-up
Best Case=Max. Take-up
Take-Up (sqm) Vacant Space (sqm)
Number of Years
Required to take-up the
total vacant space*
0.2
0.5
1.2
0.5 1.0
1.0 2.1
2.4 4.7
100
%
50
%
25
%
*
*Years that Market would need to occupy the total vacant space
according to the take-up in thebest, worst and average case of the
10 last years, considering 100%, 50% and 25% of Net Take-Up
Conversion ratio from gross
Take-Up to net Take-Up
Following Madrid’s trend, Catalonia’s has
well-performed keeping positive demand
figures pushing up the number of
speculative projects, but at a low
peace due to the scarcity of land.
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Catalonia vacancy absorption scenariosBreakdown analysis shows a lack of vacant supply in a short run
In the Base Case, the current logistic supply in Cataloniawould be occupied in 0.5 year, considering 100% of nettake-up.
While considering the 25% of the total take-up space in theBase Case, Catalonia logistic market would need 2.1 years toabsorve the vacant space.
Main future supply areasCatalonia
Over 10 new projects
+0.3m sqm…planned in the next 3 years
Bisbal del Penedés
San Esteve /Abrera
Martorell
Llica de Munt / Mollet
Source: Deloitte
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UPCOMING
CHALLENGES
The Logistic Property Handbook 3.0Spain 2018
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Logistic
Property
GlobalizationEmerging markets
RelocationReshoring and Nearshoring
Pick up Locationconsumer demand
Urban Consolidation Center Centrally-located city hubs
DisruptionProcess Automation & Robotics
BREEAM & LEEDfacing the future
BREEAM and LEED certifications are the
most relevant sustainability certifications
worldwide. Both standards are
regularly updated in line with the market momentum.
LEADING SUSTAINABILITY CERTIFICATIONS
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Source: Deloitte
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• Usually building made ad-
hoc for the company
• Big sizes >25,000sqm
• Not always located on
logistics hotspots
To chose the right asset typology witha long run perspective
Each typology has different particularities on agreements, type ofinvestors and rents due to their size, goal and location
• Long term agreements
• Single tenant
• Goal: reception from
producers and delivery
• Rents: 3.0-5.0 €/sqm
• Standard cross docking
buildings
• Big/medium sizes
• Good locations, located on
hotspots close to the cities
• Long/medium term
agreements
• Multi tenants
• Goal: delivery to urban hubs
• Rents: 5.0-6.5 €/sqm
• Readapted office
buildings/ old warehouses
• Short sizes <5,000sqm
• Excellent locations within
the urban fabric
• Medium/short term
agreements
• Single to multi tenants
• Goal: last mille delivery
Typology schemes
E-commerce is transforming consumer
demand chains and it is generating new urban warehouse strategieswith centrally-located city hubs, satisfying
door-to-door deliveries and reducing
delivery time.
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Layered Distribution Scheme
Source: Deloitte
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Mastery on reverse logistics
Since the upsurge of e-commerce, the term “reverse logistics” has increasedits importance as customers have the desire of hassle-free returns and areunwilling to pay an additional amount.
These returns are collected by the same carriers, trying to use the same vehicle and route used for distributing goods and, after a quality check, are added to the inventory stock again.
PRODUCER
DISTRIBUTOR
RETAILER
END USER
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
AMAZON has opened a specializedcentre in reverse logistics in
Slovakia that accounts with more than
60,000sqm and will exclusively check the
state of products which have been returned
or cannot been delivered.
Emerging trends are changing the distribution ecosystem
Source: Deloitte
21 of 154
Blockchain is currently impacting all areas of business, especially on finance. This impact will be even greater on physical areas as well as on logistic warehousing. Let’s see how.
Source: steemit @beeflowers
MANUFACTURER
LOGISTICS CO.
CARRIERS
LOCAL CARRIERS
CUSTOMERS
CUSTOMER ORDERS &
CONTRACTS
BLOCKCHAIN TECHNOLOGYis present in
VENDOR ORDER & PAYMENT (ONLINE)
MAERSK & IBM AGREEMENTIn January 2018, a program started in order to facilitate the intermodality and to
enhance the tracking of data and
information on physical deliveries,
using blockchain technology.
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Presence of blockchain in logistics and distribution
• Contract agreements
• Track and trace of deliveries
• Contract validations
• Conditional settlements
LOGISTIC ORDERS
BILLS OF LADING
SHIPMENT HISTORY
Mastery on blockchain distributionHow it will help in logistic activity
Source: steemit @beeflowers, Deloitte
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Total
Inventory
Market Share
Most active players expected to stay active in
2018:
Source: DeloitteSource: Deloitte
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Other relevant players:
To broaden the logistic market base is key to lead the Spanish activity in the long run
(36%)
13.1M sqm
(66%)
20M sqm
Other landlords
6.9M sqm
Challengers
(1)
(1) Including built assets, wip projects and land’s buildable logistic area (2) Including Mango Logistic Centre in Lliça de Munt (180,000 sqm)
Source: Deloitte
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Source: Deloitte
The Logistic Property Handbook 3.0Spain 2018
EXECUTIVE SUMMARY
Shark or Fish?How to play the game for a successful exit
7.7 M sqm
6 M sqm
2.3 M sqm
2 M sqm
1.4 M sqm
1.3 M sqm
17 M sqm
13.6 M sqm
Merlin Properties* 2M sqmLogicor 1.2M sqmCBRE-GI / Montepino 1.1M sqmPrologis 0.9M sqmP3 Logistic Parks 0.4M sqmVGP 0.4M sqmGoodman 0.3M sqm
(*)Including CILSA
Presence in Spain:
European footprint
Source: Deloitte
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The Logistic Property Handbook 3.0Spain 2018
To request the expanded edition, please contact Esther Sanchez, email: [email protected], telephone number: +34 911578354
For further information…
Request the Expanded EditionContents (200 pages):
1. Macro economic overview related to the Industrial & Logistic Activity.
2. European logistic market performance.
3. Spanish logistic market understanding.
4. Madrid/Catalonia/Valencia, supply and demand analysis per rings.
5. Madrid/Catalonia/Valencia, hotspot snapshots industry vacancy and new supply, rent and yield, take-up and land prices.
· 13 hotspots in Madrid.
· 14 hotspots in Catalonia.
· 6 hotspots in Valencia.
6. Logistic investment share and transactions pipeline in Spain.
7. Logistic financing market main drivers.
8. Detail of most active players and key financial terms offered.
9. Emerging trends within the logistic distribution.
10. Logistic key investment factors.
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The Logistic Property Handbook 3.0
Investment & Financing KeysSpain 2018
#TheLogisticPropertyHandbook
www.deloitte.com/es/financial-advisory/the-Logistic-property-handbook
José María EspejoSenior ManagerFinancial Advisory ‖ Real Estate
Luis González Martino, MRICSSenior ManagerFinancial Advisory ‖ Real Estate
Francisco AstorgaManagerFinancial Advisory ‖ Real Estate
Irache SantamaríaAssistant ManagerFinancial Advisory ‖ Real Estate
Antonio RegueroAssociateFinancial Advisory ‖ Real Estate
Javier ZambranaAnalystFinancial Advisory ‖ Real Estate
Lorena JuriolSenior ManagerFinancial Advisory ‖ Real Estate
Pablo VallesAnalystFinancial Advisory ‖ Real Estate
Adrián OcañaAssociateFinancial Advisory ‖ Real Estate
Javier García-Mateo, MRICSPartner – Project LeaderFinancial Advisory ‖ Real Estate
Jose María GómezPartnerM&A Tax ‖ Real Estate
Ignacio EchenagusiaPartnerM&A Legal ‖ Real Estate
Alberto Valls, MRICSManaging PartnerFinancial Advisory ‖ Real Estate
Javier ParadaManaging PartnerEMEA Industry Leader ‖ Real Estate
Rafael ArcasPartnerFinancial Advisory ‖ Real Estate
