GLOBAL INDUSTRIAL & LOGISTICS
STRENGTH, RESILIENCE AND CONTINUED EXPANSION June 2021
ECONOMIC OUTLOOK
CBRE
KEY GLOBAL TRENDS
INVESTMENT MARKET
2
REGIONAL MARKET FUNDAMENTALS
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
ECONOMIC OUTLOOK
‘NIKE SWOOSH’ SHAPED RECOVERY APAC (E X CHIN A)
120
M AIN L AN D CHIN A
USA
Asia Pacific GDP expected to return to pre-COVID levels
116 112 Q4 2019 = 100
E U RO ARE A
108 104 100 96 92 88 84 2019 Q4 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4
Source: CBRE Houseview, Oxford Economics, April 2021.
CBRE
4
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
ASIA PACIFIC TO LEAD THE GLOBAL RECOVERY, UK AND USA FOLLOW CLOSELY BEHIND GDP Growth of Key Economies
2020
2021
Germany
Japan
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0% China
APAC
World
USA
France
UK
Source: CBRE House-view, April 2021.
CBRE
5
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
KEY GLOBAL TRENDS
SUPPLY OF INDUSTRIAL VARIES BY COUNTRY Industrial Stock (Sq. Ft.) Per Capita Australia, Canada & U.S. Well Supplied – Mexico, China & Brazil Undersupplied Americas
EMEA
APAC
Australia Canada United States United Kingdom Germany France Japan Italy Mexico China Brazil 0
10
20
30
40
50
60
70
Industrial stock per capita Note: U.S. & Australia includes all industrial, the rest of the countries include logistics only. Source: CBRE Research, Oxford Economics, Qianzhan Industry Research, Shanghai Jiao Tong University, 2020. CBRE
7
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
GLOBAL TRADE ROBUST RECOVERY IN 2021 YOY Change in Exports Volume (%)
10
World merchandise trade volume is expected to increase by 8.0% in 2021
8 6 4 2
after falling 5.3% in 2020, a smaller decline than previously estimated.
0 -2 -4
Short-terms risks
-6
to the forecast are firmly on the downside and centered on pandemic-related factors.
-8 -10 North America
Europe
Asia 2020
South and Other Regions Central America
2021
Source: WTO Secretariat, March 2021. CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
GLOBAL SUPPLY CHAIN VOLATILITY DRIVING NEED FOR DOMESTIC SAFETY STOCK Total Business Inventories & Annual Change in U.S. Imports
Shipping volume has surged over the past year as retailers and manufacturers rush to replenish depleted inventories during the pandemic resulting in rising demand for warehouse space, as manufacturers look to compensate for the shortcomings of just-in-time (JIT) production networks and increase “safety stock” to offset supply chain disruptions, such as the recent closure of the Suez Canal.
*Year-over-change percent change in U.S. import value goods, not seasonally adjusted. Source: St. Louis FRED, CBRE Research, January 2021. CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
TOP U.S. PORTS BY DESTINATION COUNTRY Who Benefits From China Plus One? West Coast Ports Will Continue To Dominate, But SE Coast Ports Will See Growth With Sourcing Diversification
Source: WorldCity, CBRE Research, Q2 2020. CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
R E F O C U S I N G S U P P LY C H A I N S I N T H E C O V I D - 1 9 E R A
E X PA N D N E T W O R K I N V E N TO RY
Supply Chain Priorities
Diversify sourcing and production bases
BOOST LOCAL INVENTORY From just-in-time to just-in-case principles
CLOSER TO CONSUMPTION POINTS Increasing inventory for critical products
CBRE
11
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
COVID-19 IMPACT ON LOGISTICS REAL ESTATE IN EUROPEAN MARKETS
Source: WorldCity, CBRE Research, Q2 2020. Source: CBRE European Logistics Occupier Survey 2020/Analytiqa. CBRE
12
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
E-COMMERCE HAS BEEN AND WILL CONTINUE TO BE A KEY DRIVER OF DEMAND
2015
$12.6 trillion
2020
• Offline: $11.6 trillion • Online: $ 1.0 trillion
$13.5 trillion • Offline: $11.1 trillion • Online: $ 2.4 trillion
Source: Euromonitor, CBRE Research, May 2021. CBRE
13
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
E-COMMERCE DRIVERS: FACTORS LINKED WITH THE GROWTH OF E-COMMERCE
We explored 27 factors and split the top ones into four basic categories
DEMOGRAPHY • Urban population • Population Density • Employment in services
CULTURAL PAYMENT PREFERENCE
INFRASTRUCTURE ACCESS
• Digital skills of the population
• Credit/debit card use
• Fixed broadband subscriptions in market
• Internet usage
• Online bill pay
USAGE
• Digital payments
• Transport infrastructure • Timeliness of shipments
• Mobile internet sales share • Dominant e-commerce player
Source: CBRE Research, May 2021. CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
BUT E-COMMERCE WILL NOT GROW AT THE SAME PACE AROUND THE GLOBE CBRE E-commerce Drivers Index: How Prepared Is A Market To Support E-commerce HIGHEST POSSIBLE SCORE
LOWEST POSSIBLE SCORE
Top scoring markets
KEY E-COMMERCE DRIVERS DEMOGRAPHICS - % of urban population USAGE - Digital skills of population - Mobile internet ratio - Dominant e-commerce player CULTURAL - Credit and Debit card use INFRASTRUCTURE - Fixed broadband subscriptions
Source: Euromonitor, CBRE Research, May 2021. CBRE
15
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
E-COMMERCE PENETRATION WILL PUSH ONLINE SALES TO $3.9 TRILLION BY 2025 Internet Sales As A % Of Total Retail Sales HIGHEST POSSIBLE SCORE E-commerce penetration will continue to grow in established markets
Source: Euromonitor, CBRE Research, May 2021. CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
AND E-COMMERCE RELATED LOGISTICS DEMAND WILL ALSO INCREASE
Logistics Space
Global
2020-25 (%)
+138m sq. m.
2020-25 (%)
+61%
Americas
APAC
EMEA
+38m sq. m. +72m sq. m. +28m sq. m.
+53%
+66%
+63%
Source: CBRE Research 2021, aggregated estimates based on analysis of only the 43 markets included in the analysis. Logistics space estimated increase is only associated to the extra space required for e-commerce use. Our calculation assumes $1 billion of additional e-commerce sales requires an additional 1million sq.ft. of logistics space CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
INVESTMENT MARKET
INDUSTRIAL INVESTMENT VOLUME CONTINUES TO SURGE IN 2021 Share of Investment by Property Type (Trailing 12 Months, Floating FX)
AMERICAS
EMEA
Share of Total Investment
50% 40%
APAC
40%
50%
40%
60%
30%
40%
30%
50%
20%
30%
20%
40%
10%
20%
10%
30%
0%
10%
0%
20%
30% 20% 10% 0% 2015 2016 2017 2018 2019 2020 2021 Multifamily Hotel
Industrial Office
Retail
2015 2016 2017 2018 2019 2020 2021 Multifamily Industrial Retail Hotel Office (rhs)
2015 2016 2017 2018 2019 2020 2021 Industrial
Retail
Hotel
Office (rhs)
Source: CBRE Research, Real Capital Analytics, Q1 2021. CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
LONG TERM YIELD COMPRESSION Composite Yields By Property Type
%
Global Office Yield
Global Retail Yield
Global Industrial Yield
9 8 7 6 5.01
5
4.22 4
4.14
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
3
Source: CBRE Research, Q1 2021. CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
INVESTMENT INTEREST IN I&L REMAINS HIGH GLOBALLY Preferred Mainstream Property Sector For Investment In 2021
% of respondents
40%
30%
20%
10%
0% Industrial & Logistics
Multifamily
Office
Hotels / Resorts
Retail
Source: CBRE Global Investor Intentions Survey, 2021 CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
REGIONAL MARKET FUNDAMENTALS
GLOBAL VIEW – 2021 YTD EMEA
5.9 MSM
+3.1%
10.7B
TAKE-UP
RENT GROWTH
SALES VOLUME
AMERICAS
117.4 MSF
+5.8%
$17.9B
NET ABSORPTION
RENT GROWTH
SALES VOLUME
CBRE
APAC
23
15.4 MSF
+0.8%
$5.0
NET ABSORPTION
RENT GROWTH
SALES VOLUME
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
THE AMERICAS RECORD FUNDAMENTALS PAST 6 MONTHS
The industrial market continues to thrive with record net absorption, transaction volume and rental rate growth. Vacancy rates continue to decline. There is a record amount of sq. ft. under construction, however completions have declined in the face of construction material shortages.
3PLS INCREASE MARKET SHARE
While all industries continue to do well, the 3PL industry is performing the best. The industry is increasing market share as more companies outsource distribution due to rapidly increasing costs and a lack of available space in several markets.
INVESTORS STILL VERY BULLISH
Industrial remains the darling of commercial real estate investment. Domestic and foreign Capital are flooding the market looking to purchase industrial properties. Investors are now looking at class B space as well as secondary and tertiary markets. Despite this demand actual transaction volume has decreased because of the lack of available space for sale. Record fundamentals has led to further cap rates compression beyond record lows.
CBRE
24
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
AMERICAS REGIONAL SNAPSHOT Momentum Continues In Q1 COMPLETIONS, NET ABSORPTION AND VACANCY (MSF)
U.S. TRANSACTION ACTIVITY BY INDUSTRY, 100K SQ. FT.+
Vacancy Rate (%)
10
300
8 6 4 2 0
200 100
Completions (L) Vacancy Rate (R) Note: Includes U.S., Canada and Mexico.
New Jersey
3.88%
$8.89
PA I-78/81 Corridor
4.75%
$5.18
Chicago
4.50%
$5.83
Dallas/Ft. Worth
4.50%
$4.80
Undisclosed
Houston
4.63%
$4.92
Automobiles, Tires, & Par ts
Atlanta
4.50%
$5.23
Building Mater ials & Construction Medical
Miami
4.50%
$10.15
Los Angeles
4.00%
$11.40
Gener al Retail & W holesale
29%
7%
E-Commer ce Food & Bever age
7%
Manufacturing
16%
PRIME YIELD & AVG ASKING RENTS SQ. FT./P.A.*
3PL
5%
20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 2 20 02 21 0 YT D
0
5% 3% 3%
26%
Net A bsorption (L)
Inland Empire
4.00%
$8.52
120
Seattle
4.00%
$11.32
15
100
Mexico City
8.00%
$6.15
10
80
5
Sao Paulo
7.00%
$4.60
60
0
40
Toronto
3.75%
$10.45
INVESTMENT VOLUME
AVERAGE ASKING RENTS, Y-O-Y GROWTH 20
-5
20
Q 1
Q 1
20 12 20 13 Q 1 20 14 Q 1 20 15 Q 1 20 16 Q 1 20 17 Q 1 20 18 Q 1 20 19 Q 1 20 20 Q 1 20 21
%
U.S.
Canada
Note: Rental rates in U.S. dollars.
CBRE
Mexico
0 Billions (US$)
20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 2 20 02 21 0 YT D
-10
SOURCES: *U.S. markets indicating average asking net rents, other markets indicating prime rents. CBRE Research, Q1 2021. CBRE Econometric Advisors, Q1 2021. Real Capital Analytics, Q1 2021.
Note: Includes U.S., Canada and Latin America.
25
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
SUPPLY PIPELINE IS STRONG, DEMAND KEEPING UP U.S. Under Construction (MSF)
47% Preleased 400 350
375.7 315.7
300
321.6
312.7
298.3
250 200
176.5
150 100
97.8
134.4
115.7 86.5
50 0 Q1 2020
Q2 2020
Q3 2020 Inventory Under Construction
Q4 2020
Q1 2021
Preleased Source: CBRE Research, Q1 2021.
CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
EMEA RESILIENCE AMID GLOBAL CRISIS The logistics sector in EMEA has proven resilient during the challenging pandemic environment, resulting in record take-up and investment volumes. Existing demand trends around e-commerce have been reinforced because of the pandemic, and Brexit may lead to further diversification of supply chains.
LABOUR AVAILABILITY European logistics occupiers increasingly prioritize labour availability in their site selection process. This is driving demand in less traditional locations throughout the region.
SUPPLY RESPONSE Developers are struggling to respond to the increasing demand for logistics space due to the lack of available and suitable land. Over twothirds of the incoming new supply already have a tenant appointed, limiting the ability to react to further supply chain disruption. Landlords are also using the lack of supply to push rental growth after having prioritized keeping high occupational levels during 2020.
CBRE
27
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
EMEA REGIONAL SNAPSHOT Very Strong Investment Volumes During Q1 2021 AVERAGE PRIME EUROPEAN YIELDS
EUROPEAN COMPLETIONS, TAKE-UP AND VACANCY
30
12%
25
10%
20
8%
15
6%
5%
10
4%
4%
5
2%
3%
0%
2%
0
10 0 11 0 12 0 13 0 14 0 15 0 16 0 17 0 18 0 19 0 20 21 D 20 2 2 2 2 2 2 2 2 2 2 YT
Completions
Take-up
LOGISTICS PRIME YIELD & RENTS/SQM P.A.
9% 8% 7% 6%
10 20
Vacancy Rate (RHS)
4% 2% 0%
12 20
13 20
14 20
15 20
16 20
17 20
Prime Retail
18 20
19 20
20 21 D 20 YT
Prime Office
EUROPEAN I&L INVESTMENT VOLUMES
EUROPEAN LOGISTICS PRIME RENTS, YoY GROWTH 6%
11 20
Prime Logistics
( Billion)
Thousands
Thousands
(Million sqm)
50
-6% 10 11 12 13 14 15 16 17 18 19 20 21 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 1 20 Q1 Q Q Q Q Q Q Q Q Q Q Q
CBRE
3.40%
74.4
France (Paris)
3.50%
70.0
UK (London)
3.75%
£16.5/sq.ft.
Netherlands (Rotterdam)
3.40%
70.0
Spain (Madrid)
4.75%
66.0
Italy (Milan)
4.90%
57.0
Poland (Warsaw)
5.25%
48.0
Czech Rep (Prague)
4.75%
61.2
Belgium (Brussels)
4.00%
58.0
40 SOURCE: CBRE Research, Q1 2021 Completions, take-up and vacancy rate are aggregated for the top 9 countries mentioned above.
30 20
-2% -4%
Germany (Hamburg)
10 0
10 011 012 013 014 015 016 017 018 019 020 21 D 20 2 2 2 2 2 2 2 2 2 2 YT Q1 Q2 Q3 Q4
28
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
THE DEVELOPMENT PIPELINE IN EUROPE IS HEALTHY AND MOSTLY COMMITTED Logistics Stock Under Construction At The End Of 2020
Thousands
THOUSANDS OF SQ M
Built to Suit
Speculative
Speculative as % of Total (RHS)
3,500
60%
3,000
50%
50% 47%
2,500 40% 2,000 1,500
28%
31%
30%
30% 24% 20%
1,000 14% 10%
500 0 CBRE
Germany
France
UK
Poland 29
Italy
Netherlands
Spain
0%
CBRE Research, 2021. GLOBAL INDUSTRIALSource: & LOGISTICS MARKET Q1 UPDATE
A S I A PAC I F I C LEASING ACTIVITY STAYS FIRM Warehousing demand will remain upbeat. Aside from 3PLs and large e-commerce platforms, emerging demand drivers include community purchase groups and specialised cold chain service providers.
SUPPLY CHAIN RESILIENCE The recent Suez Canal obstruction caused significant disruption to global supply chains and raised shipping costs. The incident prompted occupiers to revisit safety stock strategies and increase inventory levels: a trend likely to translate into significant demand for bonded warehouses, large distribution centres and warehouses serving port facilities.
ROBUST INVESTOR DEMAND Logistics’ share of total investment volume rose from 16% in Q1 2020 to 20% in Q1 2021. Investors retain a positive view towards logistics, with more buyers willing to bid above asking prices for this asset class. Cap rate will continue to compress.
CBRE
30 25
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
LEASING & INVESTMENT MARKET SNAPSHOT 1Q 2021 Net Absorption Continues To Improve PRIME YIELD & RENTS/SQ. FT./P.A. COMPLETIONS AND NET ABSORPTION
VACANCY RATE (Q1)
Beijing
4.95%
$8.8
Shanghai
5.15%
$8.4
Hong Kong SAR
3.50%
$19.1
Greater Tokyo
3.35%
$13.6
Greater Seoul
5.50%
$9.6*
Singapore
6.80%
$14.1
Sydney
4.35%
$11.3
Melbourne
4.45%
$8.0
Brisbane
5.25%
$8.0
Perth
5.25%
$5.8
Auckland
4.25%
$9.6
$20
Chennai
N/A
$4.6
3
$15
Pune
N/A
$4.4
0
$10
120
Greater Tokyo
100
Auckl and Bei jin g
80
Greater Os aka
60
Shenz hen
40
Ho ng Kon g SAR Greater Seou l
20 0
Sing apo re
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Annual New Supply
APAC LOGISTICS RENT INDEX, YOY GROWTH
12%
SOURCE: CBRE Research, Q1 2021. (*Greater Seoul rent as of H2 2020)
$5
20 20 20 21
Billions (US$)
20 19
$0 Q 1
20 Q 09 1 20 Q 10 1 20 Q 11 1 20 Q 12 1 20 Q 13 1 20 Q 14 1 20 Q 15 1 20 Q 16 1 20 Q 17 1 20 Q 18 1 20 Q 19 1 20 Q 20 1 20 21
10%
INVESTOR DEMAND, TOTAL ACQUISITIONS
20 18
-9 -12
8%
20 17
-6
6%
20 16
-3
4%
20 15
6
$25
2%
20 14
9
CBRE
0%
20 13
Q4
20 12
Q3
20 11
YoY (%)
Q2
Guang zhou
20 10
Q1
Q 1
MSF
Shang hai
REIT Other Property Co mp any
Co rporation Property Fund
31
In sti tutio nal Private
Note: 1. CBRE tracks net absorption and completions for selected major markets in Asia (Mainland China Tier I & Selected Tier II cities, Greater Tokyo, Greater Osaka, Singapore). 2. Vacancy: Singapore vacancy rate is based by JTC’s official figure, which represents the island-wise warehouse. Vacancy of Auckland is as of Q4 2020. 3. Singapore yield changed to 30 years leasehold en-bloc industrial building, instead of 60 years leasehold strata-titled factory as previously reported. 4. Australia cities’ yield changed to Super Prime industrial assets, instead of Prime industrial as previously reported.
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
RENTAL GROWTH TO CONTINUE FOR REMAINDER OF 2021 Growth Prospects In Singapore And Pacific Strengthened Rents rebounding
6%
Rents growing steadily 2020 Q4 (Q-o-Q) 2021 Q1 (Q-o-Q)
5%
2021F (Y-o-Y)
4% 3% 2% 1% N/A
0%
Greater Seoul
Greater Tokyo
Greater Osaka
Shenzhen
Guangzhou
Shanghai
Auckland
Beijing
Hong Kong SAR
Brisbane
Melbourne
Perth
Sydney
-2%
Singapore
-1%
Note: Rents for Vietnam and Greater Seoul are not available for Q1 2021. Greater Seoul reports rents on a semi-annual basis, the last rental hike was in H2 2020. Rental forecast for Sydney, Perth, Melbourne, Brisbane: Super Prime , Net Effective Rents; Auckland: Prime Net Effective Rents; Singapore: Prime Logistics Rents Source: CBRE Research, May 2021
CBRE
32
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
2021 OUTLOOK E-COMMERCE
The pandemic introduced a new consumer base to online sales which led to record transaction activity the past six months. Demand from online sales and online returns (reverse logistics) will be robust in 2021. More cold storage space will be needed to support the boom in online grocery shopping.
GLOBAL TRADE
Export volume to rebound in 2021. Uncertainties of BREXIT have been cleared up upon the ratification of the UK-EU trade agreement, while US – China trade tension has cooled under Biden administration and led to record import volume. Longer term outlook for APAC is optimistic, due to the signing of the Regional Comprehensive Economic Partnership (RCEP).
SUPPLY CHAIN RESILIENCE
Will increase but the jury is out on the scope. “China Plus One” will be supply source preference for many occupiers but will be more than a year until any effect in real estate demand is generated.
CBRE
33
GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE
CONTACTS AMERICAS
EMEA
APAC
RESEARCH LEADERSHIP
John Morris
Simon Blake
John.Morris1@cbre.com
Simon.Blake@cbre.com
Troy Shortell
Richard Barkham, Ph.D.
Jack Fraker
Jack Cox
Jack.Fraker@cbre.com
Jack.D.Cox@cbre.com
James Breeze
Joerg Kreindl
James.Breeze@cbre.com
Joerg.Kreindl@cbre.com
Matthew Walaszek
Mark Cartlich
Matthew.Walaszek@cbre.com
Mark.Cartlich@cbre.com
Troy.shortell@cbre.com
Matt Haddon Matt.haddon@cbre.com.au
Liz Hung Liz.Hung@cbre.com.hk
George Wang
George.Wang@cbre.com
Richard.Barkham@cbre.com
Henry Chin, Ph.D. Henry. Chin@cbre.com.hk
Julie Whelan Julie.Whelan@cbre.com
Jos Tromp Jos.tromp@cbre.com
Tasos Vezyridis Tasos.Vezyridis@cbre.com
Pol Marfà Miró Pol.MarfaMiro@cbre.com
DISCLAIMER CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE Research. CBRE
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GLOBAL INDUSTRIAL & LOGISTICS MARKET UPDATE