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European Logistics Markets driven by demand for large-size units

Development back to the peak levels of 2007/2008 albeit speculative building activity remains the exception according to Jones Lang LaSalle


  • Logistics take-up 3.6 million sq m in Q2 2013 - up 23% over the quarter and 18% on the equivalent period last year
  • Overall take-up driven by strong growth in the UK while France, Poland and Russia also expanded
  • Floor space under construction by June end has returned to the peak levels of 2007/2008 – but continues to be driven by pre-let activity
  • Prime rents remained broadly stable with no significant growth expected in the remainder of the year – whilst the outlook for 2014 and beyond is more positive
Activity in Europe’s major logistics property markets strengthened significantly during the second quarter of the year. Logistics take-up at 3.6 million sq m is up 23% over the quarter and 18% on Q2 2012, reflecting renewed occupier confidence. According to Jones Lang LaSalle’s research, take-up is 5% above the five year average for H1 at 6.5 million sq m, half year volumes rose 10% on the equivalent period last year (H1 2012).
“Occupier activity in the leading logistics markets was driven by a number of large-scale transactions as supply chains respond to new customer and manufacturing patterns - with retail companies increasingly moving to multi-channel distribution models. In Q2 alone we saw twelve deals that exceeded 50,000 sq m of floor space and more than twenty ranging between 20,000 to 50,000 sq m across a number of  markets led by the UK and Germany, but also in France, Poland and Russia,” comments Paul Betts, Director Logistics & Industrial EMEA at Jones Lang LaSalle.
The UK recorded the strongest growth over the quarter (up almost three-fold) to 660,000 sq m amid strong economic recovery and continued high demand from retail companies. Elsewhere, take-up more than doubled in France, Poland and Russia over the quarter although half year figures in France and Russia were down on H1 2012.
Take-up in Germany, Europe’s logistics powerhouse, reached 1.1 million sq m in Q2, one third of the European total, albeit marking a modest 7% decline over the quarter. Nevertheless, half year volumes at nearly 2.4 million sq m continued to increase, up 9% year-on-year.
Over the quarter, around 2.1 million sq m of new developments entered construction - pushing the total floor space under construction close to 7 million sq m by June-end. This is 35% higher than one year earlier.
“Development has returned to the levels last seen during the 2007/2008 boom years. However, developers remain risk sensitive and although we see further significant occupier demand in the remainder of the year, we do not anticipate a strong return in speculative development. That said, we expect some speculative developments starting to appear over the next few months, although these are likely to remain restricted and limited to select markets such as Germany and the UK,” says Alexandra Tornow, Associate Director, EMEA Logistics & Industrial Research at Jones Lang LaSalle.
The European prime logistics rental index continued to recover on aggregate in Q2 2013, up by 0.2% over the quarter - but remained in negative territory (-0.6%) compared with a year ago. Overall, prime rents showed broad stability over the quarter, except for a 9.2% hike in Dublin, where rents are finally starting to recover from their historic lows. For the remainder of 2013, aggregate rental growth is seen to remain modest with rental growth potential in select UK and Dutch markets likely to be offset by declines in Hungary, Poland and France.

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 sq m for Continental Europe and > 10,000 sq m for the UK.

About Jones Lang LaSalle

 

Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management. For further information, visit www.jll.com.