EMEA Industrial & logistics snapshot Q2 2023

Demand for prime logistics space remains strong across EMEA due to the general maturing of the market, along with a lack of modern and efficient space that meets high ESG criteria.

Nearshoring strategies within various industries, triggered by rising global supply-chain tensions and costs, have direct consequences for the logistics markets across Europe. Yet despite this, online retail sales remain the key driver of growth in the logistics industry.

At an overall level, take-up for logistics space across EMEA has come down from the heights seen during the pandemic. Aggregate figures do however mask differences between markets. In most markets where take-up is softening, it is demand related, meaning that weak economic growth is putting a brake on leasing activity. In addition, a low level of take-up can be supply related, in that the availability of space is scarce or fails to meet occupier criteria.

Despite the recent slowdown in take-up, the vacancy rate across EMEA has remained low at 3.6% in Q2 2023. Nearly half of the markets expect vacancy to remain stable in the coming year, while 16% of markets expect a further drop in vacancy levels.

A shortage of land for development is a common theme in many markets, particularly in densely populated cities, where competition is intense from other sectors such as housing. However, so far development activity has held firm, with development completions in EMEA increasing by 4.9% in Q2 (y/y) and 8.7% in H1 2023 (y/y). Stricter legislation aiming at protecting greenfield land has caused a surge in demand for centrally located brownfield sites that can accommodate new buildings.

The occupational market remains favourable towards landlords in most markets. Rental growth continues to be positive, often beating medium term inflation targets, with very low vacancy rates for core product in core locations.

Our outlook suggests further rental growth for city-warehouses in 70% of markets, and in 68% of markets for larger logistics and distribution space. That said, rates of rental growth are expected to slow in the coming year as more speculative space comes to market.

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