BX Blackstone Inc

By Art Patnaude 

Singapore's sovereign-wealth fund has agreed to pay EUR2.4 billion ($2.66 billion) for a portfolio of European warehouses, a sector that is thriving as investors bet on internet shopping.

GIC Pte. will buy P3 Logistic Parks, which owns and manages 163 warehouses in nine countries, from private-equity firm TPG Capital and Ivanhoé Cambridge, the property arm of Quebec's state pension fund, the firms said in a joint-statement Monday.

With online shoppers expecting quick deliveries, industrial warehouses have become increasingly important to retailers. Real-estate investors have noticed.

The sale of P3 is one of the biggest real-estate deals in Europe this year. And while transaction volumes of industrial property fell in the U.K. and Germany in the first nine months of this year compared with the 2015 period, they remain above their long-term average, according to property-data firm Real Capital Analytics. Volumes rose in smaller economies such as the Netherlands, Italy and Norway.

A big draw of warehouses over shiny office towers: the returns are better. The average capitalization rate--a measure of income on property--for European warehouses was 6.5% in the third quarter, compared with 5.9% for retail properties, Rea Capital data show.

In addition to returns, the limited number of high-quality warehouses in Europe and increasing need for them has bolstered demand, according to Anand Tejani, partner at TPG Real Estate.

"The e-commerce thing is real," Mr. Tejani said. "If you start to think about major companies like Amazon needing to deliver to consumers in a matter of hours, that highlights the important role that these warehouses are playing."

This isn't GIC's first foray into industrials. In 2014, the sovereign-wealth fund bought IndCor Properties, a U.S. warehouse platform, from Blackstone Group LP for $8.1 billion.

Blackstone has built another industrial property company in Europe. Logicor, set up in 2012, owns 660 warehouses in 18 European countries. The company has hired two banks, one to explore the sale of the business, the other an initial public offering, a person familiar with the matter said.

Formerly niche real-estate sectors have been moving toward the mainstream. Historically, offices and shopping malls were the mainstays of property investors. They remain far larger sectors in terms of invested capital.

But warehouses, student housing, care homes and even garden centers have gained traction in recent years.

As investors pile in, returns have fallen. For instance, the return on European warehouses in 2013 was about 2% more than shopping malls, whereas that figure is now just 0.6% more, Real Capital data show.

It isn't just real estate that has crept up the wish list for global investors. Demand for other alternative assets, such as private equity, have been surging. Ultralow interest rates and loose monetary policies at central banks around the world have sent returns on assets such as bonds lower, making alternative assets more attractive.

TPG and Ivanhoé Cambridge bought P3 in 2013. Since then, the firm has doubled in size, the joint-statement said.

"We are confident of the long-term potential of the European logistics sector, and look forward to expanding this attractive platform," said Lee Kok Sun, chief investment officer at GIC Real Estate.

Write to Art Patnaude at art.patnaude@wsj.com

(END) Dow Jones Newswires

November 07, 2016 09:42 ET (14:42 GMT)

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