Logistics Market is Hot, but is a Bubble Forming?

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

Quote by Jonathan Needell  |  The Real Deal

December 15, 2020

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.

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