Prologis has reported record occupancy of 95% across its European portfolio at the end of the first quarter of 2016. And, in some markets occupancy was at or near 100%.
The global industrial property specialist signed new leasing agreements totalling 260,500 m2 in Europe in the first three months of year. At the end of the quarter, the company's operating portfolio was 15.4 million m2. Adding developments and value-add acquisitions, the portfolio came to 16.4 million m2.
'Occupancy in Europe is at an all-time record, and that has been sustained for a number of quarters,' said Ben Bannatyne, president, Prologis Europe. 'We've made a real push over the last two years in terms of reshaping our portfolio and that has really paid off.'
The UK is leading the charge for both capital market activity and occupier demand. 'It is an extremely strong market and we don't see that slowing down. This is really playing to our strengths as we have a great land bank in the UK which we have spent many years building up.'
Bannatyne was commenting as Prologis, a New York-listed REIT, reported core funds from operations of $0.61 per share in Q1, up from $0.49 a share a year-on year. Net earnings were down to $0.39 per share in Q1 compared with $0.65 in the same period last year when the company carried out significant sales.
Occupancy across the company's global portfolio came to 96% in the first quarter, on a par with the situation in Europe. Bannatyne said that customer sentiment was becoming more even across Europe. 'It remains strong in the UK and Northern Europe, and is improving in Central, Eastern and Southern Europe. Occupancy across our European portfolio remains the highest on record.'
'Across continental Europe it is a bit of a mixed picture – all positive but some more positive than others,' Bannatyne said. Northern Europe continued to perform very well with occupancy of 96% to 97%. The Northern European markets showing the strongest demand were the UK, Hamburg, Munich, South Netherlands, Rotterdam and Sweden. Leasing in France, and mainly the Paris region, was slightly lower than expected but there are signs activity is picking up there as well.
Lyon, Le Havre and Barcelona in Southern Europe, and, Prague, Budapest and Bratislava in Central and Eastern Europe also performed strongly in Q1. Key leasing transactions in Europe during Q1 included 35,000 m2 for XPO, a third-party logistics provider, near Amsterdam; Linemart, a third-party logistics provider taking 18,000 m2 in Prague and an express shipping service company taking up 7,100 m2 in Chorzow, Poland.
Development
Prologis acquired €30 mln of buildings, totalling 52,760 m2, and five land plots, totalling 414,390 m2, across Europe in the first quarter of 2016. The company also sold properties in Spain, the UK and the Netherlands for a total of €214 mln. The main sales transaction involved a 144,300 m2 portfolio of Spanish industrial properties to GreenOak Real Estate's Continental European Private Equity Real Estate Fund.
Prologis is focusing on leasing levels and exploiting its land bank, rather than investment transactions to grow the business, given that the supply of Class-A distribution facilities remains low across all European markets. In the first quarter, Prologis Europe started four developments in the Netherlands, the UK and the Czech Republic. Totalling 59,030 m2, 71% of the development space was build-to-suit and 29% was speculative.
'We would have been closer to 50-50 for speculative and build-to-suit at the beginning of the year, but we are seeing speculative projects we planned to build been taken up before we start. We will probably finish the year around 70% build-to-suit and 30% speculative,' Bannatyne said.
