‘Intense competition for logistics space in Europe’

The competition for European logistics space is intensifying. In the first half of 2019, logistics take up reached a record 11.9 million square metres. This was combined with downward pressure on yields, according to the European Logistics report based on a sector study by global real estate provider Savills.

Savills monitors the growth of e-commerce in all European property markets. The data demonstrates that e-commerce is the driving force behind the record level of demand across the whole of Europe. In markets such as the UK, the Netherlands, Germany and France, where more than 10% of all retail purchases are made online, the take up level in square metres is 1.5 million, 2.0 million, 2.9 million and 1.4 million respectively. This shows that the rising demand among retailers is contributing to the upward swing in the take-up figures.

Vacancy rates continue to fall throughout Europe

“Countries such as the UK, Germany and the Netherlands are continuing to attract the most attention. Due to the growing European distribution network, however, we’re also seeing a huge increase in logistics activity in Spain and Portugal and Central and Eastern Europe,” explains Marcus De Minckwitz, Director Regional Investment Advisory Division at Savills EMEA.

“Because vacancy rates are still falling in the whole of Europe, and especially in the core markets – and since the number of new developments can’t keep pace with demand in most markets – we expect to see further rental growth in the short to medium term. Most of this rental growth will affect ‘prime’ properties in strategic locations close to key motorways, ports and airports, due to the fact that the competition in such areas is fiercer than ever. The strong demand in such locations is attracting considerable attention from investors, which is leading to record price levels,” adds De Minckwitz.

Weaker first half of the year for UK and Germany

The UK (- 19%) and Germany (- 18%) suffered a slightly weaker first six months due to a shortage of available investment product. Sweden (+ 91%), Poland (+ 83%), Czech Republic (+ 80%) and Norway (+ 16%) all surpassed their five year H1 average investment volumes.

“The focus for the second half of the year remains on the development pipeline in the various cities,” says Mike Barnes from the European research team at Savills. “This is an important factor for investors when weighing up the different risks in different countries. The prospect of rental growth in Europe’s logistics hotspots and the low inflation in the Eurozone will also be factored into the logistics yields.”