2015 A RECORD YEAR FOR EUROPEAN LOGISTICS TAKE UP
Due to a growth in private consumption, supply chain consolidation and an increase in the scale of logistics operations, 2015 produced the highest logistics take up on record in the EMEA region. This is despite a quiet fourth quarter due to muted activity, particularly in Central and Eastern Europe (CEE). A number of key cities reported year-on-year growth, though, including London, Paris, Antwerp, Madrid and Berlin.
In the wake of strengthening occupier demand, availability across the region has dropped further. As a result, the core CEE and Western European markets are currently showing logistics vacancy rates of just 5 to 6% nationwide. The only exception is the UK where nationwide vacancy actually rose by about half a million sq m. This has mainly been caused by a boost in speculative development, so far the only market in the EMEA region where this has taken off. Although the European development pipeline increased in 2015, this is largely full of built-to-suit projects.
Rental growth in the EMEA region strengthened in 2015 and recorded an overall prime rent increase of 2.6% year on year. Due to a limited supply of suitable land for new development, Dublin, London and Zurich were the strongest growing hubs. 2015 saw a downward trajectory in yields, particularly those in non-core markets which moved in considerably. EMEA capital values have risen by almost 12% year on year and in recovery markets such as Spain, Portugal, Italy and Ireland the prime yield has moved in by more than a percentage point.
Investment into industrial assets reached the second highest quarterly volume on record in Europe hitting nearly €8 billion in Q4. This is in part due to the asset class becoming increasingly attractive to institutions, and the amount of funds now allocated to the sector has reached unprecedented levels. The UK had the best performance, accounting for 40% of industrial investment into Europe.
Last year’s exceptional take up levels reflect increased retailer activities, predominantly the expansion of logistics operations which have been fuelled by growing and evolving consumer demand. Looking ahead to 2016, we expect to see further market growth. City delivery will be a major focus for logistics operators in 2016 as consumers expect shorter delivery times and urban transport constraints reach critical levels. As investor demand for logistics assets remains substantial the lack of grade-A product will shift investment focus to secondary product and other types of assets such as multi let complexes, production facilities and even infrastructure.
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