The supply of European logistics space has dropped to a new low, with average vacancy rates across the region sitting just under 2.3%, a decrease of 50 bps year-on-year, according to new research published by global real estate advisor, CBRE.
The low availability levels are restraining the number of units that can be offered to occupiers and have left many requirements unmet. Despite a slower quarter, take-up year-to-date totalled 19.56 million m2 as at Q3 2022. This represents a 2.2% decrease on the same period last year, when take-up reached 20 million m2, showing that occupational demand has remained robust, particularly in the production and manufacturing sectors.
The imbalance between supply and demand continues to put pressure on rents, with several locations reporting further increases in their prime rents during Q3. Amsterdam saw a 25% increase in prime rents compared to Q3 2021. This was followed by Lyon, Bristol and Copenhagen, which saw increases of 13%, 12% and 8% respectively.
Simon Blake, chairman, EMEA Industrial and Logistics at CBRE said: ‘Many locations across Europe are facing historically low vacancy levels and the supply response is being hindered by high borrowing costs, increasing construction costs and higher exit yields. Collectively, these factors make some developments unviable for now and are resulting in higher occupational costs, both through rental growth as well as indexation.’
Joerg Kreindl, head of EMEA Occupier Industrial and Logistics, CBRE added: ‘Over the past two years we have seen numerous record-breaking quarters and as such, we did not expect this extraordinary trend to be maintained. Demand fundamentals for logistics are still better positioned than other commercial real estate sectors in Europe, but we are starting to see some caution from occupiers due to the macroeconomic backdrop.’
