23008_Nearshoring Report

FOR INVESTORS/LANDLORDS

• Landlords have opportunities to leverage relationships with existing tenants to explore how they may work together to secure new facilities in new geographies or expand existing operations. This could be through forward funding of developments or extensions to existing facilities with potential upside on lease regears and capital valuations. • Some countries present foreign currency exchange risk also but where companies are seeking to establish complementary facilities in nearer-to-home locations, there could be the possibility of contracting leases on rents denominated in alternative currencies or pegging to non domestic inflationary metrics (for example, in EUR or USD rather than the domestic currency of the country).

• This is also an opportunity to consider the risks to existing assets , whether through the potential change in business circumstance for the incumbent tenant (such as, as an OEM supplier to a primary car manufacturer, will their products remain needed as the industry moves towards EVs and away from internal combustion engine vehicles?) or through the future appropriateness of the real estate asset (will older buildings remain operationally appropriate if a tenant implements greater levels of automation?) This could help to identify opportunities to either divest of these types of assets or start devising strategies for asset management of these buildings to remain relevant to occupiers, particularly where there

• In the past, there has been some investor perception of risk relating to manufacturing assets, usually related to the perception of ‘bespokeness’ of buildings and the lack of flexibility for alternative users. However, given the evolving nature of manufacturing – particularly in high tech and green technologies – there is great potential for investors to secure new opportunities to deploy capital in a part of the industrial asset class which has typically traded at a discount to logistics and light multi-let industrial assets. Investors have the opportunity to secure long-term income, particularly for newly-built assets where tenants are committing to significant investment in automation and digitalisation technologies over a long period of time. • Investors could benefit from higher returns (albeit with possible higher risk profiles) by funding developments or acquiring assets in new and emerging locations , especially where markets have attracted little real estate investment in the past

MANUFACTURING AND LOGISTICS PRIME YIELDS*

are opportunities to upgrade the sustainability credentials of the buildings.

10%

9%

8%

7%

6%

AVERAGE PRIME MANUFACTURING YIELD

AVERAGE PRIME LOGISTICS YIELD

5%

4%

DEC-10 DEC-11 DEC-12 DEC-13 DEC-14 DEC-15 DEC-16 DEC-17 DEC-18 DEC-19 DEC-20 DEC-21 DEC-22

SOURCE: Cushman & Wakefield Research *average for same 15 countries across Europe

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C U S H M A N & WA K E F I E L D

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