Take-up in Q4 2024 totalled 7.7 million sq m, an increase of 26% compared to the previous quarter, but 7% lower than Q4 2023. Although Q4 showed improvement over the previous quarter, leasing volumes did not reach the high watermark, which would be typical for the final quarter of the year. Notably, Q2 had the highest take-up of the year with 7.8 million sq m transacted. In contrast, Q4 was the weakest final quarter of a year since the pandemic began.

Total European take-up reached 27.5 million sq m, a decline of 7% compared to 2023 but 4% higher than the pre-pandemic average. This brought total take-up more or less in line with our expectations from the previous quarter. Indeed, Q4’s weakness was a case of more of the same rather than conditions worsening.

As take-up bounced back from a dip in Q3 2024, there was significant variation across the various markets. The final quarter of the year saw most markets posting quarterly increases compared to Q3 2024. When comparing take-up this quarter against Q4 2023, the largest annual increases were in Portugal (+407.2%), Spain (35.2%) and the Netherlands (13.3%). In contrast, the UK (-39.0%) saw the largest quarterly decline in take-up, followed by the Czech Republic (-33.5%) and Budapest (-28.0%).

In annual terms, the biggest decreases were in Dublin (-58.6%), Belgium (-35.7%) and France (-22.9%). Portugal (+84.6%), Spain (+20.9%), the Netherlands (+5.2%) and the UK (+3.8%) were the only markets to see annual growth, with Poland flat year-on-year.

Anecdotally, our agents have continued to see strong demand in parts of CEE, particularly Poland. Food and Beverage, Pharmaceutical, and construction-focused manufacturing occupiers have been especially active. We have noted a renewed focus on buildings that fulfil occupiers’ long-term strategic requirements, especially for stock with strong ESG credentials.

Across many markets in Europe, we have observed a pendulum shift from a landlord-favourable market to one that favours occupiers. This has put occupiers in a better position to negotiate more favourable commercial terms compared to what they have previously been able to achieve. This likely represents the best opportunity many occupiers will have to achieve these long-term goals before the market starts to recover more strongly in the second half of the decade.

Average vacancy rates fell by 9 bps in the quarter, dropping from 6.15% to 6.06%. While this was a marginal change, it is a move in the right direction for supply in the European markets, especially in the context of continued economic weakness in the core industrial markets. This follows several quarters of deceleration in the vacancy rate growth, and while the market appears to be turning the corner, it’s important to note that the recovery is unlikely to be uniform or steady. In annual terms, vacancy rates are 85 bps higher than they were 12 months ago.

The reversal in the vacancy rate obscures the nuance of individual markets. During the quarter, six markets that form our average vacancy rate saw their average vacancy rate decline, while two saw the vacancy rate continue to rise. The swiftest declines in vacancy were in Budapest (-166 bps), Poland (-61 bps) and Barcelona (-10 bps). Of the two markets that continued to see rising vacancy rates, the Netherlands saw the greatest increase (+110 bps), followed by the UK (+28 bps).

Slower take-up and previous increases in the vacancy rate continue to drag on rental growth. The final quarter saw the Savills European Prime Rent Index edge up by just 0.3% compared to the previous quarter. Annual growth remains positive, with the prime rental index showing an increase of 2.3% compared to a year earlier. Considering current levels of available stock, rental growth is now in line with historical trends.

_{Read the articles within Spotlight: European Logistics Outlook – Q4 2024 below.}