Sunday, December 13, 2020

Real Estate: "Logistics market is hot, but is a bubble forming?"

It's always nice to see a sector you've been babbling about for a couple years finally referred to as a bubble.

From The Real Deal, December

Sector accounted for 20% of global commercial real estate spending this year

Investors can’t get enough of warehouses and logistics spaces these days, but there are some signs that a bubble could be forming.

Asset management firms including Blackstone Group, Cerberus Capital Management and KKR have doubled down on logistics centers, and prices for warehouses have surged, Bloomberg News reported. According to real estate research firm Real Capital Analytics, values for industrial properties rose 8.5 percent in the past year, while retail real estate values fell 5.2 percent and offices stayed steady.

The intense interest in the niche sector has led some, including Jonathan Needell, CIO of Kairos Investment Management, to wonder whether logistics space is headed for a bubble.

“You’re getting people chasing industrial, in particular, to prices that are unsustainable,” said Needell. His firm controls $1 billion in commercial real estate.

Investment in warehouses has ticked up outside of the United States, too. According to research firm CBRE, investments in the sector made up 20 percent of global commercial real estate spending this year, compared with just 15 percent of the total in 2015....


Our interest was oftentimes even more niche, the cold storage sector of warehousing:

December 10
Where water turns to snow: S.Korean ultra-cold warehouse prepares to store Pfizer's vaccine
November 10
Robot Company With Attached Grocery, Ocado, Unveils Two Robot Acquisitions
Warehousing Logistics: "Lille-based Exotec raises €77.1 million to support the international expansion of its warehouse robotics solutions"
French Robot Logistics Startup Scallog Secures New Funds
"In 2012 Jeff Bezos scooped up warehouse automation firm Kiva. Everyone else is still trying to catch up" (AMZN)

October 8
Logistics: Maersk Is Pretty Cool
June 2020

Logistics: Top 20 U.S. Warehouse Owners
June 2020
"Warehouse space crunch will tighten as 'lean' supply chains fatten up"
April 27, 2020
The UK Food Situation Is Going to Get Interesting
From Reuters:
World's biggest cold storage supplier could reach full UK capacity in three weeks.....
April 22
Shipping: "Global container shipments set to fall 30% in next few months" (warehouses are full)
April 16
Understanding the Oddities of the Food Supply Chain Caused By the Response To Covid-19
April 4
Supergrocer: "Inside the Story of How H-E-B Planned for the Pandemic"

June 3, 2019
Logistics: Big Money For Warehouses, Looking at Cold Storage.

...This next bit brings back some memories. My second stock to double was a cold storage company, actually a dairy with a cold storage operation that was valued at about one-quarter of comparables. I started chipping away at the float and before I got anywhere near enough stock, the management, who knew full well the value of the operation, did an LBO and took it private at 2x market and ended up generating cash-on-cash returns (for themselves) of around 40% per annum for a decade or so.

June 6, 2019
"It's About To Become A Hot Market For Cold Storage Facilities"—CBRE
March 30, 2020
"Coronavirus: Panic buying sparks surge in flexible storage demand"

Cold is very important.