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European Logistics Markets surprise on the upside in Q2 2012

Activity increased in Q2 2012 overall but remained uneven across Europe with both upside and downside shifts in evidence according to Jones Lang LaSalle Research


  • Take-up reached 3.3 million sq m in  Q2 2012 up 11% over the quarter while total half year volumes of 6.2 million sq m were down 17% on H1 2011
  • Germany wins the gold medal in terms of total take-up but activity was down 22% year-on-year in H1 2012, back to a more “normal” level of activity
  • Structural changes in the logistics sector will keep occupier activity on an healthy level over the next few years but increasing occupier and developer caution is likely to lead to a temporary postponement in real estate decisions in certain cases
  • By mid-2012, floorspace under construction reached the highest volume since the end of 2008 but remained below the 5-year average. Developments are still mostly build-to-suit
  • Most markets recorded stable rents in Q2 2012 but prime rents have been under pressure since the start of 2012 - the Jones Lang LaSalle pan-European prime rental index fell 0.9% year-on-year in Q2
 
London, date TBC 2012 – European logistics take-up for assets of over 5,000 sq m in size (10,000 sq m in the UK) surprised on the upside in Q2 2012 albeit leading industry indicators such as the Eurozone manufacturing purchasing managers’ index have been on a downward trend since March 2012. In total, almost 3.3 million sq m were taken up between April-June, 11% more than in the previous quarter.

While total half year 2012 take-up of 6.2 million sq m was down 17% on the equivalent period in 2011 (H1 2011) due to a weaker start to the year, volumes were still around 20% above the 10-year average, and only 5% below the 5-year average. This period includes four years of booming occupier activity, reflecting underlying structural changes that drive continued robust demand in the sector.
 
Occupier activity remained uneven across Europe and instead of a move in one direction, both increasing and decreasing activity was recorded in the second quarter. Half year volumes slowed in most markets if compared to the first six months of 2011 with the exception of France (+32%), the Netherlands (+40%) and, somewhat surprisingly, Italy (+7%) and Spain (+6%). In absolute volume terms, Germany once again retained the gold medal with just below two million sq m take-up, albeit further slowing activity in Q2 (-27%) has led to a 22% decline in the first six months of 2012 overall.

“In a period dominated by turbulence in the Eurozone and uncertain global economic growth hitting export volumes it is no surprise that logistics occupiers have started to adopt a more cautious approach. Nevertheless, the still robust activity recorded in recent months sustains Jones Lang LaSalle’s view that structural changes in the sector require supply chain re-alignments to take place sooner rather than later. There is no point in postponing real estate decisions when this means to lose out to the competition due to inadequate supply chain responsiveness” Paul Betts, Head of Logistics & Industrial EMEA at Jones Lang LaSalle comments. “Nevertheless growing occupier caution amid uncertain economic growth will characterise occupier markets over the next few months. Occupiers will consider their options very carefully and in certain cases might prefer to renew existing leases or opting for functional second-hand space on a short term lease basis – which offers them the flexibility to move facilities quicker once the economic situation improves” he adds.
 
New completions reached 1.4 million sq m in Q2 2012, 5% less than in the previous quarter. While total half year volumes were 44% ahead of the same period last year (H1 2011) they were still more than 20% below the 5-year average, reflecting increased caution and difficulty sourcing development funding. Nevertheless, logistics floorspace under construction by end June continued to increase, up to 5.3 million sq m, the highest volume on record since the end of 2008, driven by ongoing build-to-suit transaction activity.
 
On a market-by-market analysis development activity remained highly uneven. Volumes were driven once again by Germany, were floorspace under construction exceeded 1.8 million sq m by end June, up 7% over the quarter, followed by Russia (750,000 sq m; -10% quarter-on-quarter), France (715,000 sq m; +43% quarter-on-quarter) and Italy (520,000 sq m; -3% quarter-on-quarter).
“With new developments built mostly on a build-to-suit basis, modern vacancy levels will remain low overall. This is likely to hold down occupier activity in the coming months due to the longer time involved in securing these developments compared to speculative supply or second-hand accommodation. This might provide the opportunity to reduce void levels in good quality second-hand stock if landlords are prepared to revise rental level downward for such facilities – although occupiers will consider taking this space only on short lease terms” said Alexandra Tornow, Head of EMEA Logistics & Industrial Research at Jones Lang LaSalle.
 
With increasing caution and renewed pressure on costs, prime logistics rents have been under pressure since the start of 2012. Most markets recorded stable rental levels in Q2 2012, however, the Jones Lang LaSalle pan-European index showed its least impressive result in more than 18 months, with a year-on-year decline of 0.9%.
“Increasing occupier and developer caution over recent months meant that any rental growth over the last 12 months was driven by dwindling supply levels. The potential for a further uplift in the second half of 2012 is now limited – with Germany and Moscow potential candidates – while rents are expected to remain broadly unchanged in the majority of markets” Alexandra Tornow comments.

In Q2 2012 prime rents continued to move in different directions on an annual basis. Rents increased in Antwerp (+2.1%), Berlin (+4.4%), Brussels (+9.8%), Düsseldorf (+3.8%), Frankfurt (+1.7%), Hamburg (+1.9%), Munich (+5.0%) and Rotterdam (+1.6%). Meanwhile, rents fell in Amsterdam (-2.7%), Barcelona (-3.7%), London (-3.6%), Madrid (-6.7%), Manchester (-4.5%) and Prague (-0.5%).
 
 
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Notes to Editors:
 

 

• Charts available upon request.
• Our occupational market data covers the 11 main European logistics markets: Belgium, Czech Republic, France, Germany, Hungary, Italy, Netherlands, Poland, Russia (take-up: Moscow only), Spain and the UK. Analysis is based on units > 5,000 m² for Continental Europe and > 10,000 m² for the UK