Research article

Record 2018 logistics take-up and resilient H1 2019 deals

Low vacancy rates continue to add upward pressure to logistics rents


Occupational Overview

Logistics take-up reached 11.9m sq m across the European markets Savills track in H1 2019, in line with the five-year H1 average (Chart 3). Germany (2.9m sq m, 25%) contributed the highest proportion of European logistics take-up during H1 2019, followed by the Netherlands (2.0m sq m, 16%), Poland (1.8m sq m, 15%), UK (1.5m sq m, 12%) and France (1.4m sq m, 12%).

The key sectors driving demand have generally been from the logistics operators, e-commerce and the manufacturing sector. We expect European logistics take-up demand to continue to gather pace, as both third party retailers and e-commerce operators expand their offer.

Vacancy rates continue to fall across Europe, particularly in the core markets. We expect this to add further to rental growth prospects in the short to medium term, as limited new speculative developments are unable to keep up with the growth in demand across the majority of markets.

Czech Republic take-up reached 722,000 sq m in the first half of the year, 13% above the H1 five-year average. Rents currently remain unchanged at €58 per sq m in Prague and with the national vacancy at only 4%, this could apply upward pressure to rents.

In Romania, markets remain constrained with the logistics vacancy rate at 5.5% as at H1 2019. Take up mid-year reached 124,000 sq m during H1 2019, around 18% above the five-year half-year average. Bucharest accounted for around 70% of take-up, with prime rents remaining unchanged at €48 per sq m.

In Poland, total new logistics developments are forecast to reach 2.5m sq m by the end of 2019. A slowdown in German manufacturing in 2019 is forecast to impact industrial production in Poland, though e-commerce growth and stable private consumption will keep this to only a mild demand for logistics space, with rents remaining steady.

A shortage of available options in Germany’s top five markets could see prime rental growth reach around 5% over the next 12 months, due to rising construction prices as developers operate at full capacity. 2018’s leasing volumes exceeded 7m sq m, with 2.9m sq m leased during H1 2019.

Logistics take-up in the first half of 2019 in the Netherlands was limited by the level of available space. The national vacancy rate now stands at only 7.1%, the lowest level since 2010. The growth of ‘Agglo-logistics’, secondary industrial locations within reach of several large cities, will satisfy the increasing demand for shorter delivery times.

Semi-industrial and logistics take-up in Belgium reached a combined 699,000 sq m in H1 2019, largely in line with the long-term average. We expect full-year logistics volumes to be in line with last year at c.700,000 sq m, but semi-industrial volumes to drop below last year’s level of 1m sq m. This is largely due to resilient demand for larger units, but limited demand for smaller units and a shortage of stock.

France logistics take-up reached 445,000 sq m during the first half of 2019, around the five-year average level for H1. Île-de-France accounted for 32% of leasing activity, as rents remain at €52 per sq m, in line with the year-end 2018.

Spain’s strong economic performance continues to boost demand for logistics space. Rents in Madrid (€66 per sq m) and Barcelona (€84 per sq m) have risen by 2% and 4% respectively during the first half of 2019. New speculative development in Madrid has increased vacancy rate to 9.3% in the first half of the year, however, the strongest level of take-up in Q1 on record in Barcelona, has pushed vacancy rate below 4%.

Despite e-commerce only accounting for around 5% of total retail sales in Portugal, logistics take-up reached 69,000 sq m in the first half of the year, 7% above the five-year H1 average, with rents rising 11% in this period.

In the United Kingdom, 2019 has been dominated by talk of Brexit, stockpiling and media attention covering a shortage of warehouse space to assist with these outcomes. However, the growth of the online retail sector drove H1 take-up to 1.5m sq m, 28% above the long-term average for the first half. Nationwide, vacancy has fallen to only 6.6% and which has increased prime rents by 12% in the first half of 2019 in the London Heathrow market.

Dublin’s H1 2019 take up reached 181,000 sq m, 32% above the five-year H1 average following Ireland’s rising e-commerce sales. Limited development activity in Dublin has resulted in falling vacancy, which now only stands at 3.6% and continues to add upward pressure on rents. Indeed, prime logistics rents have risen 5% to €105 per sq m in Dublin during H1 2019.

New developments in Sweden continue at healthy levels, with 600,000 sq m being completed in 2019 slightly short of the record volumes produced in 2018. It is very likely the logistics and industrial sector will experience a record year of investment transactions after an impressive start, which is being fuelled by increasing supply.

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