Economic conditions continued to improve in Q2 2024, with both the occupier and investment markets seeing quarterly growth, likely as a result of brighter outlooks
Introduction and Economic Overview:
In early 2024, economic growth in Europe was slower than expected, but momentum has increased throughout the year. The April outlook projected modest growth, with the euro area expected to see real GDP growth of 0.8% in 2024. By July, the International Monetary Fund (IMF) revised this forecast upwards to 0.9%, driven by robust private consumption and strong exports. Oxford Economics forecasted a 1.1% increase in personal consumption for 2024, supported by wage and employment growth. Interest rate cuts by the European Central Bank (ECB) and Bank of England (BoE) are expected to further boost consumer spending. This positive economic outlook is likely to increase demand for industrial and logistics properties, as rising consumption drives the need for more storage and distribution facilities. Property developers and investors should capitalise on these trends to ensure long-term growth and profitability.
Occupier Market Highlights:
Despite a strong Q2, with take-up rising by 20% quarter-on-quarter, H1 2024 take-up was 4% lower than H1 2023, totalling 13.1 million sq m. Leasing activity in the UK led the recovery in Q2 with a 43.8% year-on-year increase. There is still significant variation between markets with many markets seeing annual declines. Vacancy rates rose to 5.99%, with significant increases in Madrid, the Czech Republic, and the Netherlands. Despite slower take-up, rents grew by 2.2% in H1 2024, with notable annual growth in Venlo, Lisbon, Rotterdam, and Schiphol.
Investment Market Insights:
In the first half of 2024, investment volumes reached €16.5bn, marking a 17% increase from the latter half of 2023 and a 24% rise compared to the same period last year. This growth signifies a sustained recovery since the low point in Q1 2023. Poland and Sweden led the annual growth, while Belgium, the UK, and Italy saw declines. The industrial and logistics sectors maintained a 24% share of total investment. Notably, average prime yields across Europe fell by 3 basis points (bps) in Q2 2024, the first decline since early 2022. This shift, driven by interest rate cuts, is expected to enhance market confidence and attract more investment. Investor sentiment will play a crucial role in the market’s recovery, with significant capital ready to be deployed as financing costs decrease.
Read the articles within Spotlight: European Logistics Outlook – Q2 2024 below.
