The European industrial & logistics market saw a significant uptick in investment in the first quarter of this year, reaching €8.2 billion, the highest level since 2022, with this surge signalling the start of a robust recovery.

From an occupational perspective, despite a slightly muted start to the year take-up was still only 2.6% shy of the pre-pandemic Q1 average, with rental growth continuing to outpace historical averages. This, alongside resilient demand, paints a positive picture.

With this in mind, what can we expect from the Netherlands, one of Europe’s core logistics markets, in the second half of the year?

Investment appetite remains

While increased investor costs of capital have impeded transaction activity in the first quarter, expected reductions in interest rates should offer more flexibility moving forward. At present, the Netherlands is one of the most liquid markets in Europe due to its supply and demand dynamics, specifically in relation to its significant lack of stock.

Given that there is almost no new pipeline of supply, the low vacancy rates are providing some comfort to investors. However, the prime markets are still relatively slow, with the value-add, core-plus stock where there are shorter leases with reversion potential, pretty active in comparison.

Can we expect a full recovery?

As we know, the negative interest rates seen prior to the pandemic are unlikely to return. Therefore, all things considered, we can expect to see the market make a full recovery to a more acceptable level in line with the current economic climate. In short, we probably won’t see 3% net initial yields for core long-let product ever again, but 4% is not beyond the realm of possibility.

What’s more, there remains a wall of capital that is looking to be deployed into real estate. From a lender’s perspective, they often have a strong preference for logistics over offices, for instance, and we are starting to see this reflected in the bidding process.

What about the occupational market?  

From an occupational perspective, the Netherlands was one of the few countries across Europe to see an increase in take-up in Q1, seeing growth of 2.8%. Nevertheless, much more space is required to keep pace with existing demand with vacancy levels currently sitting at a national average of just 4%, with some hotspots facing minimal to non-existent supply. In fact, some occupiers are now looking at Germany and Belgium because they’re much more likely to find the right warehouse accommodation.

With trends such as onshoring and the continued growth of e-commerce not abating anytime soon, development is needed and fast. Locations such as the Port of Rotterdam still have a lot more capacity to grow, although challenges including the availability of power and political policy are both causing delays on the planning side.

What can we expect moving forward?

We expect to see a greater emphasis on ESG, with legislation due to come into effect at some point in the future. At present, office assets need to have an energy label C or higher to be let. This doesn’t currently apply to logistics, but that will no doubt change.

This needs to be addressed given the level of dated stock currently in the market. It is going to require a lot of investment to get buildings up to standard.

We also expect that the anticipated shift in interest rates after the summer will see increasing investor demand. It only takes one, and once one investor goes, we are likely to see others follow, which bodes well for the second half of 2024. 

Further information

Contact Douglas van Oers or Niek Poppelaars

Logistics Confidence Index 2024