European warehouse take-up reached 13.4 million m2 in H1 2023, down 37% year-on-year but only 9% lower than H1 2019, suggesting a return to pre-Covid levels, according to preliminary data from Savills.
The second quarter performed better than the first, although take-up still declined by only 9%. This was an improvement over the 17% fall in Q1 2023 over Q4 2022.
For H2, Savills anticipates that take-up will remain subdued, although a likely rise in occupier activity in Q4 is likely. This is based on the analysis of UK requirements data, which fell by 64% during the course of four quarters, dropping to its lowest point in Q3 2022. However, the last three quarters have seen a significant rebound, growing by 75% trough-to-peak.
Take-up in Q4 might increase if this pattern is replicated in other European markets.
Andrew Blennerhassett, associate in the industrial & logistics research team at Savills, commented: ‘The decline in demand is a symptom of weak economic activity on a European and global level. Occupiers, in particular ecommerce firms, rapidly expanded their footprints during the pandemic, but have now been met with economic uncertainty and lower consumer spending leading to an excess of space in the short-term. Regardless of this, we have not seen an insurmountable level of stock return to the market. Indeed, whilst we may not see take-up return to its pandemic era peaks, the current slowdown in activity represents a return to pre-Covid norms rather than a considerable fall in demand for logistics space.’
‘What’s more, inflation data has been promising in recent months and the European Central Bank (ECB) has signalled that further interest rate hikes will be data-driven rather than a forgone conclusion after hiking the base rate by 25bps in July. An end to rising interest rates would bring greater certainty to the economy, stimulating both consumer spending and private investment. This, in turn, could generate a new wave of logistics demand in the new year.’
Marcus de Minckwitz, head of EMEA industrial & logistics at Savills, added: ‘The trends that have driven occupier demand before and during the pandemic have not reversed. Forecasts for ecommerce revenue and penetration show a return to growth in 2023. Whilst this will not immediately translate into logistics demand this year, occupiers remain forward looking, especially with the availability of stock in many markets still low by historic standards. We have also seen a sharp fall in speculative development in recent quarters, with the space that has come to the market likely to be quickly absorbed as demand returns in the coming years.’
