Introduction and Economic Overview:

The eurozone has shown signs of recovery, with a 0.3% quarterly increase in GDP during Q1 2024. Employment also rose by the same percentage, reflecting improved labour market conditions. Inflation is decelerating across Europe, supporting a more dovish stance on monetary policy. Policymakers anticipate rate cuts in June, aiming to stimulate economic activity.

Economic forecasts predict rising household disposable incomes, which should boost consumer spending. As the consumer economy recovers, Europe’s logistics market may see greater demand for goods. However, recovery won’t be uniform, with Central Eastern European economies set to recover fastest.

Occupier Market Highlights:

The European commercial real estate market began 2024 with a muted tone, as leasing activity in Q1 reached 6.2 million square metres (sq m), a 24% decrease from the previous quarter and 13% lower than the same period last year. Despite this, take-up was only 2.6% shy of the pre-pandemic Q1 average, indicating a relative steadiness in the market.

Meanwhile, the average vacancy rate climbed to 5.85%, marking a significant 193 basis points (bps) increase over the past year and accelerating from the 12 bps rise in Q4 2023. In contrast to the slowing take-up and rising vacancies, rental prices bucked the trend, with average rents across Europe growing by 0.9% since the end of 2023 and 5.8% annually. Rental growth, outpacing historical averages, suggests a resilient demand in the face of a fluctuating supply landscape.

Investment Market Insights:

The first quarter of 2024 marked a significant upturn for the European investment market, reaching €8.2 billion – the highest level since 2022 and representing a 17% increase from the previous quarter and a 36% rise year on year (YoY). This surge signals a robust recovery from the low point in early 2023, suggesting that investment volumes could spearhead the current market revival.

Despite overall market sluggishness, the logistics sector has outperformed, with investment volumes climbing by 36% since Q1 2023, contrasting with declines in office and retail investments. The industrial and logistics sectors now claim 27% of total investment, more than double their share since 2019, indicating a strategic shift by investors towards logistics assets. Meanwhile, the pressure on prime yields is easing, with a modest 5 bps increase in Q1 2024, the smallest in two years, bringing the average yield to 5.33%, up 133 bps from early 2022. 

_{Read the articles within European Logistics Opportunities below.}