20161220_CBRE-GlobalPrimeYields

Global Growth Supports
Strong Capital Flight
to Prime Logistics Assets
GLOBAL INDUSTRIAL & LOGISTICS PRIME YIELDS
DECEMBER 2016
CBRE RESEARCH

2 © 2016 CBRE, Inc.CBRE Research | Global Industrial & Logistics Prime Yields, December 2016
Global prime logistics yields continued to decline in
the second half of 2016
While capital flows to real estate have slowed a little in 2016
due to economic volatility in the first half of the year, there
continues to be strong interest in prime logistics assets in top
tier hubs due to robust market fundamentals.
EMEA had largest Y-o-Y decline in prime logistics yields
Prime yields decreased by 48 bps over the 12-month period
(Q3 2015–Q3 2016), driven by Antwerp, Paris, Leeds/Sheffield
and Milan—all of which decreased by 75 bps Y-o-Y. The average
prime yield was 6.01% in Q3 2016.
The Americas had the lowest average prime yield,
at 5.84% as of Q3 2016
The U.S. industrial market is experiencing tightening
fundamentals, with limited new supply and rising rents,
driving capital to high-performing markets such as
New Jersey, Inland Empire, Oakland, Los Angeles/Orange
County, Seattle, Vancouver and Chicago.
E-commerce and a transformation in the physical supply
chain is driving growth in China
Investment turnover in the sector increased 51% Y-o-Y in Q3 2016
while yields tightened by 29 bps Y-o-Y, down to 6.68% in Q3 2016.
Demand from e-commerce has been strong in China, South Korea,
and India with many investors interested in capturing this
structural change in consumer behavior.
Growth in investment activity is expected to continue,
but investors may proceed with caution in 2017
Tier-1 hubs across all regions have room to run in the current
cycle, which will continue to drive liquidity in prime logistics
assets. We expect the incoming Trump administration to boost
the U.S. economy in the near term, which will increase the
flow of goods through logistics hubs. Further out there are
some risks in the sector from increased barriers to trade, but
we anticipate these to have mild implications.
Executive Summary

1
Hong Kong
4.00%
+10 bps
4
Inland Empire
4.25%
-25 bps
2
Tokyo
4.10%
-40 bps
3
New Jersey
4.25%
-25 bps
5
Los Angeles/
Orange County
4.25%
-50 bps
6
Oakland
4.25%
-50 bps
9
Vancouver
4.75%
-50 bps
7
Seattle
4.50%
-50 bps
10
Chicago
5.00%
-25 bps
8
London
4.50%
-10 bps
1
2
8
6
7
9
3104
5
Top Global Logistics Hubs by Prime Yield
(Ranked by lowest prime yields as of Q3 2016)
Source: CBRE Research, Q3 2016.

2016 has been a weaker than expected year for the global
economy. Politics has played a part: first, the UK referendum
to leave the EU, then, in the U.S., the surprising election of
‘outsider’ Donald Trump. As a result, investors have taken a
cautious approach. Meanwhile, in spite of some stabilization
in China’s economy, the growth of global trade has been
weak. Despite these headwinds, real estate capital flows look
reasonably well supported by the global economy, and it is
clear that there continues to be a strong appetite for investment
in commercial real estate. In 2015, the total value of real estate
investment was US$987 billion, just trailing the previous peak
in 2007 of US$1.035 trillion. Although global investment has
slowed in 2016, the total sales volume of US$605 billion through
the first three quarters is still 17.0% higher than the average
three quarter volume since 2011.1
Compared to other property sectors, such as office and retail,
prime logistics is an attractive asset class for capital, providing
a higher initial return on investment—nearly 6.0%, compared
to 4.5% and 4.0% for prime office and prime retail, respectively.
Figure 1 shows the average prime yields in tier-1 global markets,
with industrial and logistics having a higher average yield than the
office and retail property sectors.
Investors continue to be drawn to prime logistics assets due
to strong market fundamentals. In the U.S., the logistics sector
is booming, and the tightening supply has pushed up rents,
as leasing demand outpaces new construction. Deliveries and
under-construction totals continue to trail both the long-term
average and current demand, implying significant room for new
supply in the near-term. There have been 26 consecutive quarters
of positive net absorption, pushing occupancy to 95.0%—the
highest level since CBRE Econometric Advisors began tracking
this metric in 2002. The Q3 2016 Net Rent Index has surpassed
the previous peak and is expected to continue rising into 2017.
During Q3 2016 average rents rose in 74% of the markets tracked
by CBRE Research. This is driven by consumer confidence and
Introduction
Compared to other property sectors, such as office and retail,
prime logistics is an attractive asset class for capital, providing
a higher initial return on investment
1. CBRE Global Report: The Property Perspective—Is the market at a tipping point? Q3, 2016.
Real Capital Analytics (RCA)

by infrastructure projects, policy changes and the growth of the
middle class. Several large-scale projects are under construction
in the Greater Pearl River Delta, impacting the logistics landscape.
Strategic locations such as satellite cities around Guangzhou
(Nansha, Foshan, Machong), Huiyang (east of Shenzhen) and
Western Hong Kong are experiencing a growth in development.
New infrastructure may open new avenues for logistics develop-
ments, potentially decreasing transportation costs and delivery
times. Policy changes in this rapidly changing region will improve
transparency and investment into the logistics sector. One major
driver of these changes is e-commerce, which continues to show
robust growth as more people shop online in China, South Korea
and many other growing hubs across Asia Pacific.
Overall, the prime logistics sector is performing well in The
Americas, EMEA and Asia Pacific, supporting a healthy capital
investment environment with steady yields and compression
in primary hubs.2
The transformation of the physical supply
chain will continue to fuel demand for logistics facilities as users
seek additional space. This bodes well for investors as they seek
out strong property types in areas of opportunity and growth.
spending as the U.S. economy continues to improve after a slow
first half of 2016.
On December 14, 2016 the Federal Reserve raised its interest
rate target by 25 bps, indicating a stronger economy with full
employment and stable inflation. Many economists have a
positive outlook, with an optimistic view of the GDP growth
and unemployment in the next few years. This bodes well for
industrial real estate, as consumer demand for goods is expected
to continue in the near term.
In Europe, the logistics market has performed well in the first
half of the year and appears to have been relatively unscathed by
Brexit concerns. Occupier demand remains strong. While growth
in the UK has slowed post-Brexit, the slowdown has been much
milder than expected, and the broader European economy has
been resilient in the face of political uncertainty. This has driven
robust retail sales growth, especially in e-commerce. However,
there has been a slowdown in industrial investment sales due to
the geo-political environment in Europe.
In the Asia Pacific region, despite some economic concerns, there
continues to be sustained demand for logistics facilities driven
Figure 1: Global Prime Yield Comparison by Property Type
10
9
8
7
6
5
4
3
OfficeIndustrial & Logistics Retail
Q201 Q202 Q203 Q204 Q205 Q206 Q207 Q208 Q209 Q210 Q211 Q212 Q213 Q214 Q215 Q216
Yield (%)
2. Reflective of CBRE’s “Global Emerging Logistics Hubs” report which highlighted the most significant industrial and logistics markets in the world.

The Americas
In the Americas, prime logistics yields (also referred to as “cap
rates”) declined by 18 bps year-over-year to an average of 5.84%
in the primary hubs. The gradual tightening of cap rates for
stabilized assets has continued, albeit at a slower pace. The U.S.
coastal markets of New Jersey, Inland Empire, Los Angeles/Orange
County and Oakland recorded the lowest cap rates, at 4.25% in
all four markets. The lowest cap rates in Canada were prevalent
in Vancouver, at 4.75% and Calgary and Toronto, at 5.25%.
As for the Latin American markets, they had higher yields,
ranging from 7.50% to 10.25% in Mexico, Chile and Brazil.
The U.S. industrial market is experiencing strong fundamentals,
with limited new supply and rising rents, leading to increased
demand for industrial property, logistics assets in particular.
Industrial investment in the U.S. in Q3 2016 totaled $14 billion,
rising 3.4% year-over-year, and up from previous quarters
in 2016. Overall, The Americas saw an uptick of 7.0% in total
transaction volume in Q3 2016, year-over-year, according to
RCA Global Capital Trends.
Asia Pacific
In Asia Pacific, industrial & logistics facilities continue to be
in demand as evidenced by the increased turnover in the sector
and compression in yields. According to CBRE, investment
turnover in the sector increased 51% y-o-y in Q3 2016 while yields
tightened by 29 bps y-o-y. Demand from e-commerce has been
strong, particularly in China, South Korea, and India with many
investors interested to capture this structural change in consumer
behavior. Despite the strong interest and investment into the
logistics sector, future activity is likely to be restricted by lack
of tradable assets and constrained land supply. The market is
dominated by several major industrial developers. However,
most of them have already developed strategic partnerships with
top tier institutional investors. New equity will find difficulty
entering the market. In China and South Korea, the majority of
key third party logistics (3PL) operators have already secured
capital partners.
Regional Performance
Growth in investment activity is expected to continue, but
investors may proceed with caution in 2017
High performing markets in Americas and EMEA see
low yields, APAC constrained by lack of tradable assets

EMEA
In EMEA, the average yield in Q3 2016 was 6.01%, dropping by
48 bps year-over-year. London’s M25 Ring Road primary hub
market recorded the lowest yield, at 4.50%, down 10 bps since
Q3 2015. Antwerp, Leeds, Milan and Paris all had the largest
declines in yields, shedding 75 bps for each market. Overall, the
lowest yields can be seen in the UK, Germany and the Netherlands.
Property fundamentals have been strong in these markets with
vacancies hovering around 4.5%. In general, the positive net
absorption across key markets in Europe has put upward pressure
on rents. However, the main driver of rental growth has been lack
of development potential. Meanwhile, consumer confidence is
stabilising and consumer demand continues to grow, indicating
that the logistics sector has room to run in this cycle.
In general, Asia is less developed logistically than the U.S.
and Europe, with less prime logistics stock per capita. With
the exception of Singapore, all the Asia Pacific global hubs have
less prime logistics stock per capita (averaging 0.9 sq. ft. per
capita) compared to their US (5.6) and EU (1.8) peers.3
Finally,
in the tier-1 cities in China and Hong Kong, land supply is
scarce near the urban core. The local governments’ control
of land resources is pushing developers further away from the
city center. In Tokyo, the majority of the new supply is being
developed in the outermost ring of the Greater Tokyo area.
Overall, while the modernization and fundamentals for Asia
Pacific logistics remain solid, the investment activity may slow
in the future due to the higher barriers to entry.
3. Asia Pacific Logistics Hubs 2015. CBRE, Dec 2015.
The transformation of the physical supply chain will continue to
fuel demand for logistics facilities as users seek additional space

Average Prime Logistics Yields by Region
TOP 5 LOWEST PRIM E YIEL DS B Y REG ION
( R ANKED LOWES T TO HIGHES T)
NewJersey
London
Tokyo
InlandEmpire
Berlin
Auckland
LA/OrangeCounty
Dusseldorf/Cologne
Shanghai
Oakland
Frankfurt
Beijing
Seattle
Hamburg
Melbourne
4.25 4.25 4.25 4.25
4.50 4.50
5.00 5.00 5.00 5.00
4.10
5.70
6.30 6.40
6.60
THE AMER I CAS
EMEA
AVERAG E PRIM E YIELD
Q3 2016
AN N UAL CHAN G E B REAKDOWN
Q3 2015 – Q3 2016
5.84 -18 bps
6.01 -48 bps
6.68 -29 bpsASIA PACI FIC

Figure 2: Regional Performance, Prime Logistics Yields and Y-o-Y Change (Ranked by yields lowest to highest)
All yields are extracted from prime logistics assets (Class A/A+) on a net/single net basis.
RegionCountryPrime Yield Change (bps)MarketRank
APACHong Kong, China 4.00 10Hong Kong1
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
United Kingdom
United Kingdom
United Kingdom
Germany
Germany
Germany
Germany
Germany
Netherlands
Netherlands
Netherlands
Sweden
France
Poland
Belgium
Germany
4.50
5.25
6.00
5.00
5.00
5.00
5.00
5.00
5.40
5.40
5.40
5.75
5.75
6.00
6.00
5.00
-10
-50
-25
-60
-60
-60
-60
-60
-60
-60
-60
0
-75
-50
-75
-60
London
Midlands
Manchester / Liverpool
Berlin
Dusseldorf / Cologne
Frankfurt
Hamburg
Munich
Amsterdam
Rotterdam
Tilburg / Eindhoven / Venlo
Stockholm
Paris
Warsaw
Antwerp
Ruhr
8
20
33
12
13
14
15
16
22
23
24
29
30
31
32
17
APAC
APAC
Japan
New Zealand
4.10
5.70
-40
-100
Tokyo
Auckland
2
28
Americas
Americas
Americas
Americas
Americas
Americas
Americas
Americas
Americas
Americas
Americas
Americas
Americas
Americas
United States
United States
United States
United States
United States
Canada
Canada
Canada
United States
United States
United States
United States
United States
United States
4.25
4.25
4.25
4.25
4.50
4.75
5.25
5.25
5.00
5.25
5.00
5.50
5.50
5.50
-25
-25
-50
-50
-50
-50
0
-50
-25
-25
15
50
25
-25
New Jersey
Inland Empire
Los Angeles / Orange County
Oakland
Seattle
Vancouver
Toronto
Calgary
Chicago
Atlanta
Dallas / Ft. Worth
South Florida
Houston
Philadelphia
3
4
5
6
7
9
18
19
10
21
11
25
26
27

Figure 2: Regional Performance, Prime Logistics Yields and Y-o-Y Change (Ranked by yields lowest to highest)
All yields are extracted from prime logistics assets (Class A/A+) on a net/single net basis.
RegionCountryPrime Yield Change (bps)MarketRank
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
EMEA
Spain
Spain
United Kingdom
Italy
Czech Republic
Hungary
Russia
6.25
6.25
6.25
6.25
6.50
8.50
12.80
-25
-25
-75
-75
-25
-50
0
Barcelona
Madrid
Leeds / Sheffield
Milan
Prague
Budapest
Moscow
35
36
37
38
41
52
56
APAC
APAC
APAC
APAC
APAC
APAC
APAC
APAC
APAC
APAC
China
China
Australia
Australia
South Korea
Singapore
Australia
Australia
Australia
Australia
6.30
6.40
6.60
6.80
7.00
7.30
7.40
7.50
8.70
9.00
-40
-20
-60
-30
-50
-20
0
-30
0
0
Shanghai
Beijing
Melbourne
Sydney
Seoul
Singapore
Brisbane
Perth
Canberra
Adelaide
39
40
42
43
44
45
46
48
53
54
Americas
Americas
Americas
Americas
Americas
Mexico
Mexico
Mexico
Brazil
Chile
7.50
8.00
8.00
10.25
8.25
-50
0
0
-25
0
Monterrey
Baijo
Mexico City
São Paulo
Santiago
47
49
50
55
51
AmericasCanada 6.25 0Montreal34

Figure 3: Americas Prime Logistics Yields, Q3 2016
Note: Americas prime yield are for stabilized Class A properties. Cap rates to nearest 25 bps.
Q3 2016 Prime Yield Change (bps)Primary Hub MarketMarket
4.25 -50OaklandOakland
5.00
10.25
5.50
5.50
5.50
6.25
7.50
8.00
-25
-25
-25
25
50
0
-50
0
ChicagoChicago
São PauloSão Paulo
PhiladelphiaPhiladelphia
HoustonHouston
MiamiSouth Florida
MontrealMontreal
MonterreyMonterrey
BaijoBaijo
4.25 -25Northern New JerseyNew Jersey
4.25
4.25
4.50
4.75
5.00
5.25
8.00
8.25
5.25
5.25
-25
-50
-50
-50
15
-25
0
0
0
-50
Inland EmpireInland Empire
Orange CountyLos Angeles / Orange County
SeattleSeattle
VancouverVancouver
Dallas / Ft. WorthDallas / Ft. Worth
AtlantaAtlanta
Mexico CityMexico City
SantiagoSantiago
TorontoToronto
CalgaryCalgary

Figure 4: EMEA Prime Logistics Yields, Q3 2016
4.50 -10M25 Ring RoadLondon
5.25
6.25
8.50
5.75
5.75
6.00
6.00
6.00
6.25
-50
-25
-50
-75
0
-75
-50
-25
-75
BirminghamMidlands
Madrid
Budapest
Madrid
Budapest
ParisParis
StockholmStockholm
AntwerpAntwerp
WarsawWarsaw
ManchesterManchester / Liverpool
LeedsLeeds / Sheffield
5.00 -60BerlinBerlin
5.00
5.00
5.00
5.00
5.00
5.40
6.25
6.25
6.50
12.80
5.40
5.40
-60
-60
-60
-60
-60
-60
-75
-25
-25
0
-60
-60
DusseldorfDusseldorf / Cologne
FrankfurtFrankfurt
HamburgHamburg
MunichMunich
DuisburgRuhr
AmsterdamAmsterdam
MilanMilan
Barcelona
Prague
Moscow
Barcelona
Prague
Moscow
RotterdamRotterdam
EindhovenTilburg / Eindhoven / Venlo

Figure 5: APAC Prime Logistics Yields, Q3 2016
6.30 -40ShanghaiShanghai
7.50 -30PerthPerth
6.40 -20BeijingBeijing
6.60
6.80
7.00
7.30
7.40
8.70
9.00
-60
-30
-50
-20
0
0
0
MelbourneMelbourne
SydneySydney
SeoulSeoul
SingaporeSingapore
BrisbaneBrisbane
CanberraCanberra
AdelaideAdelaide

Global prime logistics yields are expected to continue to hold
steady, with overall compression tapering in 2017. Given recent
political events in the U.S. and Europe, investors may proceed
with caution in 2017. Implications from new trade policies and
cross-border relations will likely come into play, with some
impacts on industrial markets in the U.S. and China. Despite
these potential risks, the logistics sector looks poised for
continued growth amid a burgeoning e-commerce market across
all regions. This will continue to drive global demand and the
transformation of the supply chain. As a result, capital will
continue to flock to prime logistics assets in global hubs, but
it will be influenced by the supply and demand dynamics. In
the U.S., for example, there is significant room for new supply
in the near-term in hubs like Dallas/Ft. Worth and Chicago.
Markets in EMEA and Asia Pacific don’t have the benefit of
available land supply, and dense hubs like London and Hong
Kong will have new development constraints, keeping logistics
assets at a premium in these tier-1 cities.
Outlook
Despite potential risks, the logistics sector looks poised for
continued growth amid a burgeoning e-commerce market
across all regions

Methodology
This report outlines yields for prime, stabilized Class A/A+
logistics assets in 56 global hubs in the Americas, Asia Pacific
and EMEA as of Q3 2016. The yields were gathered based
on industrial distribution space of the highest quality and
specification, and in the best location within each industrial
hub. This is a continuation of CBRE’s “Global Prime Logistics
Rents” report from Q2 2016 that explored the market rents
for prime logistics properties in industrial hubs around the
world, and what factors have driven the rent growth in these
particular facilities. Consequently, many of the same factors
are driving prime yield compression as investors flock to
industrial real estate.
The key variables for prime logistics buildings include:
• Facilities greater than 100,000 sq. ft./10,000 sq. m. in size
• Clear ceiling height greater than 26–36 feet or/ 8–10 meters)
• Office space to industrial space ratio of no more than 10%)
• Loading dock ratio of 1 dock: 10,000 sq. ft. / 1,000 sq. m. or less)
• Building must be purpose-built for logistics and distribution
(manufacturing facilities not included)
Understandably, each market has its own set of criteria for
“prime” logistics space, and therefore the appropriate building
size, specifications, and loading dock ratio varies by market.3
Calculations and Definitions
The global prime yields in this report represent the yield which
an investor would receive when acquiring grade/class A/A+
building in a prime location (near port/key transportation hub)
which is fully let at current market value rents. The calculation
for the majority of the hubs is based on a net yield, or NOI (net
operating income) divided by the total acquisition cost (purchase
price and purchase costs). However, some of the hubs in EMEA
(Stockholm, Warsaw, Barcelona, Madrid, Prague and Moscow)
reported based on a single net yield, or NOI divided by the
purchase price excluding purchase costs. This is because
the purchase costs are not transparent between deals, so the
single net yield is the best measure of prime property in these
particular markets.
Explanation of Columns
Prime Yield: The yield quoted from logistics properties aligning
with our key variables.
Percentage Change: Represents the change in yield rate over a
12 month period, quoted in basis points (bps).
Yield Type: Either net or single net. The majority of the yields
are full net, with the exception of 6 markets in EMEA reporting
single net, as explained above.
Methodology & Definitions
3. Some markets deviate from this criteria, such as New Zealand—size > 1,500 sq. m., Hong Kong—clear ceiling height > 4 m., Hong Kong—cargo-lift access buildings have
lower throughput, Tokyo—clear ceiling height > 5.5 m., Tokyo—loading dock ratio 1 dock: 1300 sq. m. China—loading dock ratio 1 dock: 1300 sq. m.

Industrial & Logistics Research
David Egan
Head of Industrial & Logistics Research, Americas
+312 935 1892
david.egan2@cbre.com
@Egan2David
Machiel Wolters
Head of Industrial & Logistics Research, EMEA
+31 20 626 26 91
machiel.wolters@cbre.com
@MachielWolters
Robert Fong
Director, Asia Pacific Research
+852 2820 2882
robert.fong@cbre.com.hk
Matthew Walaszek
Senior Research Analyst, Global Industrial
& Logistics
+1 312 297 7686
matthew.walaszek@cbre.com
Jason Fong
Manager, Asia Pacific Research
+852 2820 2867
jason.fong@cbre.com.hk
CBRE Research Leadership
Nick Axford, Ph.D.
Head of Research, Global
+44 20 7182 2876
nick.axford@cbre.com
Richard Barkham, Ph.D.
Chief Economist, Global
+44 20 7182 2665
richard.barkham@cbre.com
Neil Blake, Ph.D.
Head of Forecasting and Analytics,
Global
+44 20 7182 2133
neil.blake@cbre.com
@neilblake123
Henry Chin, Ph.D.
Head of Research, Asia Pacific
+852 2820 8160
henry.chin@cbre.com.hk
@HenryChinPhD
Spencer Levy
Head of Research, Americas
+1 410 951 8443
spencer.levy@cbre.com
@SpencerGLevy
Jos Tromp
Head of Research, EMEA
+31 20 626 26 91
jos.tromp@cbre.com
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at
www.cbre.com/researchgateway.
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not
verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its 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.
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