Long-term structural growth drivers accelerate as Covid-led surge in demand for European logistics real estate set to roll on beyond 2024
The explosive growth in occupier demand for European industrial and logistics assets during the Covid-19 pandemic, fuelled by a surge in ecommerce volumes, will maintain momentum in the medium term while supply constraints will persist as economies recover.
Investor demand, which soared in the past 18 months, will also remain strong until at least the end of 2024, according to the results of the first pan-European Logistics Real Estate Census conducted across all major markets.
The Census, carried out in the summer of 2021 by supply chain market analysts Analytiqa on behalf of Tritax EuroBox plc, a leading investor in European logistics real estate, and international real estate advisor Savills, received 412 responses from large companies across all areas of the pan-European market.
Nick Preston, Fund Manager at Tritax EuroBox plc, says: “The results of our first pan-European Census confirm our view that occupier and investor demand for logistics properties in Europe will remain strong for at least the next three years, led by the major French, German, Spanish and Italian markets, where sentiment is notably upbeat. With an increasing lack of adequate supply of new warehouse space cited as the top challenge for the logistics sector by all respondents, there will continue to be sustained upward pressure on rents and ongoing yield compression, particularly in those European markets where supply is most constrained. The pandemic has accelerated long-term structural growth drivers, and the results of our Census clearly underline that these will remain strong and resilient beyond 2024.”
European logistics real estate take-up by occupiers in the first half of 2021 was 60 per cent above the average for the same period over the last 10 years. Vacancy rates also fell to a record low of 4.6 per cent across European markets between January and June this year, and headline rents have risen by 2 per cent over the last 12 months, led by Lisbon, Warsaw and Hamburg. European logistics property investment reached a record €22.5 billion in H1 2021, a 60 per cent rise over the five-year average, and yields have compressed by 45 basis points year-on-year in the same period, with asset prices in the French and German markets advancing the most.
Marcus de Minckwitz, Head of EMEA Industrial and Logistics, at Savills, says: “The Census clearly underlines our belief in the long-term strength and performance of the logistics sector. It is no surprise that we have seen record levels of investor interest in recent years and asset pricing has increased as a result, but we can be very confident about the continued growth of the sector moving forward, based on an overriding positive sentiment.”