As online retail sales as a proportion of total retail sales has increased over recent years, omnichannel investors have adjusted their investment allocation towards buying more and more logistics assets in the UK and across continental Europe.

With the highest online penetration rate in Europe at approximately 19 per cent, the UK also has the highest logistics investment proportion over the last three years (at 58 per cent as of Q3 2019). Investment volumes for UK distribution warehouses reached £3.75 billion for 2019, making it the second highest capital deployment ever.

Volumes were bolstered by two key portfolio transactions: Tritax’s acquisition of DB Symmetry and Morgan Stanley’s purchase of the Tudor portfolio. The figures represent a 6 per cent rise on 2018 and pushes the three year rolling average to the highest level ever.

The Netherlands (14 per cent) and Germany (13 per cent) are second and third in terms of online sales as a proportion of total retail sales. Logistics as a percentage of omnichannel investment in both countries stood at 48 per cent and 36 per cent, respectively, for the three years to Q3 2019.

Large transactions in 2019 include Savills advising a German open-ended fund on the sale of a warehouse of 60,000 sq m in Waalwijk, the Netherlands, to M&G Real Estate, and Blackstone buying a €450 million logistics portfolio in Germany and Poland.

We expect average Western Europe online retail to account for 15 per cent of total retail sales by the end of 2023, up from the current average level of 11 per cent. Prologis estimates that for every €1 billion increase in online retail sales, 72,000 sq m of additional logistics space will be required, which would indicate a need for an additional 11.6m sq m of logistics space in Western Europe by then to keep up with online retail demand alone.

Proportionally, Forrester expects the strongest online retail growth to be in Italy (21.4 per cent per annum), Spain (17.4 per cent) and Greece (12.7 per cent), given the relatively lower bases making these markets ones to watch for long-term investors if the right assets become available.

We have seen aggressive inward yield movement for logistics space over the past 12-18 months across Europe, however the Nordic markets still appear relatively cheap compared to their European counterparts. Over the next 12 months, we expect rents to increase and yields to harden across the region. 

Further information

Read more: European Logistics 2019