LONDON, FEBRUARY 27, 2013 – Despite a stabilisation in industrial production in Europe towards the end of last year, it is likely that conditions in the sector will continue to remain tough until a sustainable economic recovery takes place. However, the industrial and logistics market is being boosted by US investors and there is increasing demand for space from online retailers across Europe.
Findings from Colliers International’s EMEA Industrial & Logistics Report published today, suggest that the recovery of the industrial and logistics sector will depend heavily on how quickly Europe’s economic problems can be resolved and improvements filtered through.
Erik Barnekow, EMEA Industrial and Logistics team leader at Colliers International said: “While 2013 is expected to be another difficult year for the European economy, the industrial and logistics market is expected to remain stable. With hardly any speculative development in the pipeline, the market will continue to be characterised by the supply-demand imbalance. Pre-lease agreements and build-to-suit projects will constitute significant market share.
“As the economic conditions remain challenging, many occupiers expect more flexible lease terms, therefore companies that cannot commit to long term liabilities might defer decisions or turn towards secondary properties.”
Key findings include:
Limited supply of quality space: The EMEA industrial and logistics market continues to be characterised by limited supply of quality space and hardly any speculative projects under construction. Many occupiers therefore have limited choice of new developments. Prime rents remain broadly unchanged across the majority of markets. A further decrease of rents took place in Southern Europe, where demand was restrained by poor economic performance. Core Western European markets continued to record relatively healthy demand levels, while in Eastern Europe, Russia and Poland dominated the market again. The largest transactions in the region were signed by retailers Leroy Merlin (56,000 sq m, renewal, Poland) and Adidas (65,000, pre-lease, Russia).
US buyers boost the market: Industrial and logistics investment in EMEA totalled approximately €12 billion in 2012, 5 per cent down compared with the previous year and about 11 per cent of total CRE investment. With over €3.5 billion worth of industrial and logistics
acquisitions, US investors were by far the largest group of cross-border buyers in Europe, targeting mainly UK property. The UK retained its status as the most liquid logistics investment market in Europe (43 per cent of total investment) followed by Germany and France. 2012 was also notable for European logistics investment as Norway’s sovereign wealth fund made its first acquisition in the sector – purchasing half of a portfolio through a joint venture with Prologis.
Demand from the e-tailers to expand: As online retail continues to grow, increasing demand from multi-channel retailers is expected, not only in the strongest online markets such as the UK and Germany but also in emerging markets such as Russia, where online sales are booming. Russia, Poland and Turkey are seeing significant levels of space under construction. However, the vast majority of space has already been leased and, along with declining vacancy levels, an increase of bulk space rents is anticipated in some markets.
Barnekow concluded: “With little investable new stock expected to come onto the market from development, opportunities will mainly arise from investors disposing of non-strategic assets or assets that have come to maturity within their portfolios.
“2013 will bring a greater understanding of the implications of e-retailing on the supply chain and lead to a reappraisal of investment products such as fulfilment centres, last mile logistics and cross docking warehouses that have traditionally fallen outside many investors’ focus. This will also bring more clarity about pricing and potentially boost liquidity in this segment of the market.”