Steady occupier demand for European logistics assets – Jones Lang LaSalle
Occupier demand for European logistics assets held steady in the third quarter of 2012, says Jones Lang LaSalle in its latest research into the market for logistics property of more than 5,000 sq m (10,000 sq m in the UK). Take-up in Q3 2012 reached 3.0m sq m, in line with the previous quarter, but activity remains uneven across Europe and year-to-date volumes of 9.3m sq m are down 15% year-on-year, the firm notes.
Negotiations are starting to become tougher, with cost and risk management remaining at the top of the agenda for occupiers and for landlords, notes Paul Betts, head of logistics and industrial EMEA at JLL. “Despite this, we continue to see plenty of demand in the market as occupiers re-align their existing supply chains to meet the requirements of internet-retailing and multi-channel distribution. Therefore, we currently see consolidation in take-up taking place on a high level,” he added.
There was a significant jump in activity in the UK logistics market in Q3 2012 (up 68%), and in the Czech Republic (+56%), France (+54%), Poland (+35%) and Russia (+35%). Over the first nine months of the year, only three markets recorded rising year-on-year take-up: the Czech Republic (+18%), the Netherlands (+16%), and Spain (+8%).
For the whole of 2012, take-up volumes across Europe are now expected to remain below 13m sq m, which would be down 15% year-on-year.
New completions reached 1.9m sq m in Q3 2012, up 34% compared with the previous quarter. For the first nine months of this year, overall completions are 33% ahead year-on-year at 4.9m sq m. While completion volumes have continued to edge up, the development pipeline started to weaken slightly during the third quarter, JLL notes. New development starts were below 1.6m sq m in Q3, down 35% q/q, and total floorspace under construction by end-September amounted to 4.7m sq m, down 10% over the quarter and 1% lower y/y.
“With development activity still facing significant headwinds we expect the momentum in occupier activity to slow as required conditions such as lease length and the overall rental package from occupiers and developers are drifting further apart,” said Alexandra Tornow, head of EMEA logistics & industrial research at JLL. She feels the long-term market perspective is exciting, however, as global supply chains will continue to grow and change. “Over the next few years, in particular internet retail, the rising scale of container shipping and a shift in manufacturing locations but also the growth of new markets will boost occupier demand,” she added.
Rents for prime logistics property remained stable in most markets during Q3 2012 but are still under downward pressure overall in the short term. By the third quarter, annual rental growth was limited to Antwerp (+2.1%), Brussels (+9.8%) and Frankfurt (+1.7%) while rents fell in seven of the 25 cities surveyed – Amsterdam, Barcelona, Budapest, Dublin, Leeds, Madrid and Manchester. The Jones Lang LaSalle pan-European prime rental index was down 1.0% year-on-year.
