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06. Oktober 2011 
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European logistic markets: Economic uncertainties drive caution
A strong logistics recovery in the first half of 2011 has lost some momentum as austerity measures and weak economic growth predictions lead companies to act with caution according to the latest report ‘Property Times - European Logistics’, released today by DTZ. Moving into 2012, the logistics markets will be influenced by two contrasting factors: strong growth prospects in CEE and Nordics in respect of industrial and consumer activity, pitted against the impact of austerity measures across Europe. A general sense of caution in the market is already evident with a number of industrial and logistics companies continuing to keep under review their property requirements until there is more economic certainty.
In the first half of 2011, a strong economic resurgence drove the logistics markets forward. Take-up in H1 2011 increased in the top five markets to a total of 6.9 million sq m, up from 5.5 million sq m during the same period in 2010. German and CEE logistics markets were boosted by the economic recovery with retailers and manufacturers taking advantage of improving sentiment. Take-up in Germany increased 42% and in CEE 28%. In addition, the UK market experienced a large decline in grade A space as demand from retail and manufacturing sectors continued to absorb the limited supply of this space. As a result, the demand for built-to-suit schemes has increased as occupiers seeking well specified buildings in the most popular locations have had fewer options from within the existing supply.
In the short term, industrial production forecasts reveal a mixed situation across Europe. Germany, CEE and the Nordics are predicted to grow between 7% and 9%. In contrast, the UK and France remain below the European average of 5.7%. Consumer spending across the wider European region is expected to remain subdued over the next three years. However, the UK, France and Germany are predicted to perform above the regional average. Furthermore, CEE and Nordics will again outperform with 2% to 3% per annum (2011-2014) set to benefit from low exchange rates and minimal levels of public debt.
The logistics investment market has remained broadly stable in the first half of 2011 with €4.6 billion invested, in line with the equivalent period in 2010. The recovery in the logistics investment market is still on track but at a slower pace than the global market. The UK and German investment markets remain relatively buoyant with volumes transacted reaching €1.3billion and €800 million respectively. The CEE markets registered their best performance for a decade with €450 million invested. This correlates with the latest DTZ Fair Value Index™ analysis which reveals that alongside the retail sector, logistics is one of the most attractive sectors for investors with the majority of markets covered remaining attractively priced.
The report also reveals that prime rents stabilised in the majority of the European logistics markets during the first half of 2011 and are forecast to increase in core markets during 2012. Between 2011 and 2015, prime logistics rental growth is forecast to increase on average 1.5% per year, albeit slightly behind the recovery rate of the office and retail sectors. Some European markets such as Barcelona are predicted to experience a more dramatic rental recovery reversing the declines over the past three years.
Rob Hall, Head of DTZ CEMEA Logistics, comments: “With the exception of a few locations, speculative development of logistics space is unlikely to be a realistic option for a while. The first half of 2011 got off to a positive start with strong take-up in locations such as Belgium, Germany and France, however, given current market uncertainty we anticipate a slow- down in the second half of the year. Despite these uncertainties there are still positive signs of growth in the logistics sector with some recovery in prime rents anticipated by 2012.
“Furthermore, retail sales, a key driver in the logistics markets are forecast to return to growth in all major markets. E-commerce is emerging as one of the fastest growing sectors in Europe with Amazon signing two of the largest transactions of H1 2011 and anticipated business growth linked to e-retailing is already evident in the UK, France and Germany.”
Magali Marton, Head of DTZ CEMEA Research, said, “Our latest Fair Value Index™ European analysis reveals that industrial markets offer good income returns as lack of supply at the prime end of the market is expected to keep rents broadly stable, with growth prospects in some markets. Total returns in European industrial markets are forecast to be the higher than the office sector. Industrial markets including Prague, Antwerp, Barcelona and Brussels are rated HOT meaning these present the most attractive investment opportunities with high income returns and predicted capital growth of 1.6% per year until 2015.”
In the first half of 2011, a strong economic resurgence drove the logistics markets forward. Take-up in H1 2011 increased in the top five markets to a total of 6.9 million sq m, up from 5.5 million sq m during the same period in 2010. German and CEE logistics markets were boosted by the economic recovery with retailers and manufacturers taking advantage of improving sentiment. Take-up in Germany increased 42% and in CEE 28%. In addition, the UK market experienced a large decline in grade A space as demand from retail and manufacturing sectors continued to absorb the limited supply of this space. As a result, the demand for built-to-suit schemes has increased as occupiers seeking well specified buildings in the most popular locations have had fewer options from within the existing supply.
In the short term, industrial production forecasts reveal a mixed situation across Europe. Germany, CEE and the Nordics are predicted to grow between 7% and 9%. In contrast, the UK and France remain below the European average of 5.7%. Consumer spending across the wider European region is expected to remain subdued over the next three years. However, the UK, France and Germany are predicted to perform above the regional average. Furthermore, CEE and Nordics will again outperform with 2% to 3% per annum (2011-2014) set to benefit from low exchange rates and minimal levels of public debt.
The logistics investment market has remained broadly stable in the first half of 2011 with €4.6 billion invested, in line with the equivalent period in 2010. The recovery in the logistics investment market is still on track but at a slower pace than the global market. The UK and German investment markets remain relatively buoyant with volumes transacted reaching €1.3billion and €800 million respectively. The CEE markets registered their best performance for a decade with €450 million invested. This correlates with the latest DTZ Fair Value Index™ analysis which reveals that alongside the retail sector, logistics is one of the most attractive sectors for investors with the majority of markets covered remaining attractively priced.
The report also reveals that prime rents stabilised in the majority of the European logistics markets during the first half of 2011 and are forecast to increase in core markets during 2012. Between 2011 and 2015, prime logistics rental growth is forecast to increase on average 1.5% per year, albeit slightly behind the recovery rate of the office and retail sectors. Some European markets such as Barcelona are predicted to experience a more dramatic rental recovery reversing the declines over the past three years.
Rob Hall, Head of DTZ CEMEA Logistics, comments: “With the exception of a few locations, speculative development of logistics space is unlikely to be a realistic option for a while. The first half of 2011 got off to a positive start with strong take-up in locations such as Belgium, Germany and France, however, given current market uncertainty we anticipate a slow- down in the second half of the year. Despite these uncertainties there are still positive signs of growth in the logistics sector with some recovery in prime rents anticipated by 2012.
“Furthermore, retail sales, a key driver in the logistics markets are forecast to return to growth in all major markets. E-commerce is emerging as one of the fastest growing sectors in Europe with Amazon signing two of the largest transactions of H1 2011 and anticipated business growth linked to e-retailing is already evident in the UK, France and Germany.”
Magali Marton, Head of DTZ CEMEA Research, said, “Our latest Fair Value Index™ European analysis reveals that industrial markets offer good income returns as lack of supply at the prime end of the market is expected to keep rents broadly stable, with growth prospects in some markets. Total returns in European industrial markets are forecast to be the higher than the office sector. Industrial markets including Prague, Antwerp, Barcelona and Brussels are rated HOT meaning these present the most attractive investment opportunities with high income returns and predicted capital growth of 1.6% per year until 2015.”
