The explosive growth in occupier demand for European industrial and logistics assets during the Covid-19 pandemic, fuelled by a surge in ecommerce volumes, will maintain momentum in the medium term while supply constraints will persist as economies recover. Investor demand, which soared in the past 18 months, will also remain strong until at least the end of 2024, according to the results of the first pan-European Logistics Real Estate Census conducted across all major markets.
The Census, carried out in the summer of 2021 by supply chain market analysts Analytiqa on behalf of Tritax EuroBox and international real estate advisor Savills, received 412 responses from large companies across all areas of the pan-European market.
'The results of our first pan-European Census confirm our view that occupier and investor demand for logistics properties in Europe will remain strong for at least the next three years, led by the major French, German, Spanish and Italian markets, where sentiment is notably upbeat,' said Nick Preston, fund manager at Tritax EuroBox. 'With an increasing lack of adequate supply of new warehouse space cited as the top challenge for the logistics sector by all respondents, there will continue to be sustained upward pressure on rents and ongoing yield compression, particularly in those European markets where supply is most constrained. The pandemic has accelerated long-term structural growth drivers, and the results of our Census clearly underline that these will remain strong and resilient beyond 2024.'
RECORD TAKE-UP
European logistics real estate take-up by occupiers in the first half of 2021 was 60% above the average for the same period over the last 10 years. Vacancy rates also fell to a record low of 4.6% across European markets between January and June this year, and headline rents have risen by 2% over the last 12 months, led by Lisbon, Warsaw and Hamburg. European logistics property investment reached a record €22.5 bn in H1 2021, a 60% rise over the five-year average, and yields have compressed by 45 basis points year-on-year in the same period, with asset prices in the French and German markets advancing the most.
FUNDAMENTALS REMAIN ROBUST
Over 80% of European investors and asset managers surveyed expect industrial and logistics investment volumes to rise in the next year, while no respondents anticipate a fall in transactions. France, Germany and the Netherlands are the three most favoured European destinations for investments among investors and assets managers who do not currently own assets in these markets.
Among occupiers, 46% predict that their space requirements will rise, with only a small group (4.8%) expecting to make a reduction over this period for all of the European markets surveyed. At the country level, the majority of occupiers in three major markets – France (44.1%), Germany (42.6%) and Spain (38.5%) – are projecting an expansion in take-up, with Italy and Portugal following at 26.4% and 24.2% respectively.
By far the biggest operational challenge for the European logistics real estate sector is the lack of supply of new buildings according to 30% of all respondents, with those citing development zoning and permits coming in a distant second at 13.6%.
