Why logistics real estate valuations are broken — and what should replace them

Institutional investors across Europe routinely base acquisition decisions on comparable property data: nearby rental rates and relative pricing. While a logical starting point, this approach increasingly misses the mark.

The market has matured. The methodology hasn't.

Europe's logistics real estate sector achieved 28.1 million square metres of take-up in 2025 — 8% above pre-pandemic averages, with investment volumes rising 11% year-on-year. Despite this growth into a highly capital-intensive sector, valuations still rely on comparable transactions — a tool designed for much smaller markets.

The comparable metric answers one limited question: what did similar buildings recently lease for? It fails to address what actually matters: what is this specific building worth to the tenants who would pay the most for it?

Two buildings. Same rent. Completely different value.

Consider two identical 20,000 square-metre logistics buildings in the same submarket, both at €65/sqm/year. Comparable analysis deems them equivalent — incorrectly.

• Building A: 4 minutes from motorway junction, 28 dock doors, 12-metre clear height, 2 MVA power.
• Building B: 18 minutes from junction, 14 dock doors, 10-metre clear height, 0.5 MVA.

For last-mile operators, Building A's proximity and throughput capacity reduce operational costs far beyond the rent premium. Cross-dock operators prioritise dock-door ratios. Pharmaceutical tenants value power supply and expansion potential over access time.

Same headline rent. Fundamentally different economics for every tenant type.

Transport costs are the hidden driver

Transport comprises approximately 58% of logistics operators' total costs, inventory carrying represents 23%, and warehousing accounts for 11% — collectively 92% of logistics expenses. Buildings that meaningfully reduce tenant transport costs command premiums regardless of comparable rates — yet comparable analysis cannot quantify this differential.

Logistics real estate is not one asset class — it's 95

Cross-dock facilities and pharmaceutical cold-chain warehouses are both logistics properties, yet share almost nothing operationally.

Cross-dock operators function on razor-thin margins where every rent penny matters, with willingness-to-pay driven by throughput efficiency. Cold-chain tenants commit to 10–15 year leases due to enormous switching costs; fit-outs typically cost 2–3× ambient construction per square metre. Last-mile urban hubs command premiums because final-delivery proximity directly reduces supply-chain expenses.

Logivalue identifies 95 distinct property types across 14 categories, each with different cost structures and willingness-to-pay drivers. Treating them uniformly produces systematically incorrect valuations.

What occupier-side analysis actually looks like

The authors have delivered over 40 fulfilment centres for operators including Amazon, Zalando, and DHL — providing occupier-side experience in supply-chain cost modelling and building valuation.

Logivalue's Investment Intelligence methodology evaluates buildings against 42 site variables — covering location, specifications, operational capability, and market dynamics — scored against 65 occupier profiles representing different tenant types and priorities.

According to CBRE's 2025 survey, labour availability has now overtaken transport connectivity as the decisive occupier location factor. 53% prioritise modern specifications, and power access is rising rapidly on priority lists — variables directly affecting tenant willingness-to-pay.

Most logistics valuations compare the building to other buildings. We compare the building to what it does for the tenant's supply chain.

The question worth asking

Rather than asking what comparable buildings command, investors should ask: which tenant type extracts the most value from this specific building — and what would they actually pay?

The spread between worst-fit and best-fit tenants for a single building can exceed 30% — the difference between solid and exceptional investments — invisible to comparable analysis. Supply-chain cost simulation reveals this hidden value.