Europe warehouse market back to normal

By Liza Helps Property Editor Logistics Matters

BIG RESEARCH reports by real estate heavyweights JLL and Savills note that take up took a hit of around 25% in 2023 compared to 2022 but that the slow down is higher than  the five year pre-pandemic average. JLL noted that 2023 still remained the fourth strongest year historically.

On a country-by-country level, Romania (+595%), Portugal (+196%) and Belgium (+42%) saw the greatest outperformance in relation to their pre-pandemic averages. In contrast, Savills saw figures in the Netherlands (-22%), Germany (-12%) and the UK (-7%) decline.

In terms of take-up, Belgium (+9%) and Dublin (+5%) were the only two markets to see annual growth, with the former recording record levels of take-up in 2023. Those countries that saw a notable fall included the Czech Republic (-38%), the UK (-38%) and Germany (-29%).

Andrew Blennerhassett, associate in Savills European industrial & logistics research team, comments: “There have been considerable shifts in take-up relative to the five-year average. Those markets that traditionally make up the bulk of European demand, such as the UK, Germany and the Netherlands have all seen their figures fall. Conversely, smaller markets like Italy and Belgium, as well as peripheral markets like Romania and Budapest are seeing an increase in activity, albeit from a very low base.”

In terms of supply JLL noted that there was a rise in speculative completions in 2023 just when occupational demand fell back to pre-pandemic levels, which resulted in higher vacancy rates in a growing number of markets. However, at just over 4%, this is far from an oversupply of space.

While there is a temporary increase in space JLl pointed out that expensive financing conditions led to declines in both built-to-suit and speculative space under construction. The latter fell to less than 7.9 million sqm by end Q4 which was the lowest level since the end of 2021.

Savills concurred. “There has been a slowdown in construction, with the increase in vacancy rates decelerating sharply in Q4, increasing by just 11bps, 83% lower than the previous three quarters.”

At present, markets like Dublin and Denmark remain acutely undersupplied, with vacancy rates of 1.7% and 2.2% respectively. Madrid and the Netherlands have seen the sharpest increases, with the latter illustrating the variance between cities. For instance, the 210bps increase in Schipol (8.8%) has driven the growth in the national figure. In contrast, the vacancy rate in Venlo has only risen by 80bps to 1.6%.