Take-up in 2023 totalled 28.8m sq m, a decline of 24% compared to 2022. While this negative result reflects a significant slowdown in the market, it’s notable that take-up was 9% higher than the five-year pre-pandemic average. The first quarter of the year was a relatively subdued start, with just 6.2m sq m of leasing activity, falling by 24% compared to Q4 2023 and 14% compared to the same quarter a year earlier. Looking at a five-year quarterly average take-up in Q1 was 23% lower than the typical Q1. That said, when we compare Q1 2024 against the pre-pandemic Q1 average we find that take-up is just 2.6% lower than this.

With take-up declining after two-quarters of improvement, take-up across Europe has fallen back in line with its low point in 2023. The greatest quarterly declines were in Dublin (-83.5%), Romania (-61.8%) and the Czech Republic (-52.9%). In contrast, Portugal (+160%) saw a strong quarterly recovery in take-up, while the Netherlands saw take-up rise by 13.9% in Q1 2023.

In annual terms, the biggest decreases were in Dublin (-85.5%), Romania (-56.9%) and Barcelona (-56.6%). Belgium, the Netherlands and the UK  saw increases of 94.3%, 2.8% and 2.7%, respectively, with the rest of Europe continuing to see negative growth in take-up and weak performances compared to the five-year average.

Notably, one of the key drivers of declining take-up across Europe in the last two years was difficulty financing large built-to-suit (BTS) deals. With the investment market now on the path to recovery and the cost of finance likely to decline over the coming months, we may begin to see a resurgence in BTS deals. Looking at the UK, BTS deals are currently accounting for 34% of take-up volumes, just four percentage points below the long-run average.

We’ve notably seen an uptick in enquiries from manufacturing, automotive and food production occupiers across Europe. This may form part of much-discussed onshoring trends, although evidence remains limited. Notably, these enquiries are focused on Grade A space, in order to facilitate greater levels of automation of their facilities, which should drive greater levels of take-up amongst Grade A stock.

The average vacancy rate continued to rise in Q1 2024, increasing by 48 bps to 5.85%. This is an increase of just under 200 bps over the last four quarters. The quarterly movement in the average vacancy rate represents an acceleration compared to Q4 2023 when the vacancy rate increased by just 12 bps.  The largest increases in regional vacancy rates were in Madrid (+177 bps), Poland (+75 bps) and the UK (+63 bps).

As we have previously noted, there remains significant variation between locations. The markets with the highest vacancy rates are Madrid (10.9%), Central Poland (+10.1%) and Warsaw Suburbs (+9.0%). The lowest vacancy rates are in Prague (1.7%), Dublin (1.8%) and Denmark (2.5%).

Despite slower take-up and continued increases in the vacancy rate, rents have continued to trend upward in the first quarter of the year. Average rents across Europe grew by 0.9% compared to the end of 2023 and 5.8% compared to a year earlier. Considering current levels of available stock, rental growth continues to outperform compared to historical trends.

The largest quarterly increases were in Schiphol (+10.0%), Venlo (+6.3%) and Rotterdam (+5.0%). Notably, rental growth has remained positive across all markets. On an annual basis, Brussels has seen the greatest increase in prime rents, increasing by 23.1%. Venlo (+21.4%), Lisbon (+17.6%), Lille (+17.0%) and Schiphol (+15.8%) have all seen significant annual growth in rents.

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