Savills reports record take up for European logistics space in 2020
Take up for logistics space across Europe reached record levels in 2020, according to new data from Savills. Over the course of the last 12 months, 26 million sq m of space was taken, up 12 per cent on the level observed during 2019 and 19 per cent above the five year average.
The front running country, Germany, accounted for 6.8 million sq m of demand, up 3 per cent on the five year average, and accounting for 26 per cent of Europe’s total take up. Poland saw a record year of take up totalling 5.2 million sq m – 45 per cent above the five-year average, as Netherlands recorded 2.6 million sq m of logistics take up, 0.3 per cent up on the five year average.
The UK saw a 58 per cent increase on the rolling five-year average with occupancy totalling 4.7 million sq m.
Mike Barnes, European Research, Savills, says: “2020 was a truly remarkable year for logistics take up across Europe and we cannot deny the impact that Covid-19 has had on e-commerce (which peaked at almost 28 per cent in the UK) and subsequently demand for logistics assets. While this will start to normalise at some point, the near-term impact of local lockdowns will continue to encourage online spend.”
The report also notes that Savills is observing more demand from cross-border Chinese ecommerce operators who operate through their own distribution centres and sell through established ecommerce marketplaces to the European markets. China’s One Belt One Road (OBOR) continues to expand across Europe, with rail freight now extending as far as Duisburg, where Europe’s largest inland port terminal is set to be developed by end 2022.
Marcus de Minckwitz, Regional Investment Advisory EMEA, Savills, commented: “While it’s still early days for demand from Chinese operators across Europe, it’s very much a trend we anticipate will accelerate in the coming years starting in Central Eastern Europe and spreading further West.”
In terms of investment, transaction volumes soared to EUR39 billion during 2020, marking a record year, up 5 per cent year-on-year and 24 per cent above the previous five year average.
The UK (EUR10.27 billion, +13 per cent vs 5yr average), Germany (EUR6.6 billion, +16 per cent) and France (EUR4.2 billion, -23 per cent) accounted for the majority of investment transactions as both domestic and cross border buyers opted for core markets. However, Poland (EUR2.6 billion, +131 per cent) and Sweden (EUR3.4 billion, +45 per cent) stood out as the markets which outperformed most significantly against the five year average.
Marcus de Minckwitz added: “Despite demand continuing to outstrip supply, a large number of portfolio deals were transacted in 2020 achieving premiums of anything between 5 per cent and 20 per cent across Europe. Given the favourable fundamentals of the sector, institutional investors are looking outside core locations in search of more attractive yields across southern Europe.
“Resilient demand for core product observed downwards pressure on prime yields in the final quarter of 2020, compressing by an average of 13 bps. Given the allocation of real estate capital targeting the logistics sector, we anticipate further yield compression through the next year.”