Take-up of industrial and logistics space across Europe fell 24% to 28.8m sq m in 2023, reveals Savills’ latest European Logistics Outlook.
The company said take-up last year was still 9% above the five-year pre-pandemic average, with the annual figure boosted by 8.1m sq m of space transacting in Q4 – although this was down 7% on Q4 2022.
Belgium (+9%) and Dublin (+5%) were the only two markets to see annual take-up grow, with the Czech Republic (-38%), the UK (-38%) and Germany (-29%) experiencing the steepest declines.
Andrew Blennerhassett, associate in Savills’ European industrial and logistics research team, said: “There have been considerable shifts in take-up relative to the five-year average. Those markets that traditionally make up the bulk of European demand, such as the UK, Germany and the Netherlands have all seen their figures fall. Conversely, smaller markets like Italy and Belgium, as well as peripheral markets like Romania and Budapest are seeing an increase in activity, albeit from a very low base.”
Investment activity also fell sharply last year across Europe with industrial and logistics transaction volumes hitting €27.5bn – a decline of 51% year-on-year.
Marcus de Minckwitz, head of EMEA industrial and logistics at Savills, said: “Despite the fact that we are seeing the spread between prime and secondary yields continue to widen, there will still be numerous opportunities for investors in 2024. With interest rates expected to trend downwards, investors face less risk and whilst last year the pricing expectation gap between vendors and purchasers was a major obstacle in the investment market, we do expect this to shrink moving forward.
“What’s clear is that the ‘wait-and-see’ approach is no longer a sustainable strategy and for this reason we anticipate that there will be an increase of assets purchased with leveraged finance in 2024. While borrowing costs are expected to decline, they are unlikely to return to the levels seen in 2019. This means that stronger than average rental growth will be necessary to justify investment and development decisions in many markets. With this in mind, the logistics market appears to be well-positioned in terms of its fundamentals.”
