Logistics & Industrial Occupier Activity in Europe
Availability of appropriate logistics and industrial space remains constrained despite marginal increases in availability rates in some markets.
Occupier take-up across European markets has slowed in the past year following the exceptional levels of demand seen during the Covid-19 pandemic. Take-up reached a peak of 45.9 million sqm (four-quarter rolling total) in Q2 2022; since then, take-up has fallen back by 27% to 33.3 million sqm in Q2 2023. The slowdown in take-up is partly attributable to lengthening of occupiers’ decision-making processes: companies are considering and reconsidering their requirements, especially during this period of economic uncertainty. As a result, deals are either taking longer to complete or are not coming to market as swiftly as in the recent past. However, it is important to note that despite the fall-back in occupier activity compared with recent levels, the market is still outperforming the pre-pandemic average annual take-up of 30.0 million sqm per year. Sources of demand particularly are focusing on manufacturing, especially in the CEE countries, driven in particular by businesses’ nearshoring activities.
Larger markets have been more acutely affected by the slowdown in demand with Germany, Poland, France, the UK and the Netherlands all reporting significant drops in take-up for the four quarters to Q2 2023 compared with Q2 2022. However, nearly all markets remain at or above their pre-pandemic average annual take-up levels; in smaller markets, notably in the CEE, they are significantly higher, suggesting more structural shifts in demand for space in these countries. Take-up in the Netherlands is significantly down on its pre-pandemic average, particularly due an ongoing lack of availability, meaning that, despite high levels of demand continuing, this is unable to be satisfied as new transactions.
With the slowdown in occupier take-up, however, availability has now started to move out in some markets. This is as a result of both new supply being delivered as well as existing space being returned to the market. However, even with recent upticks in supply, availability remains at highly constrained levels in most countries, notably the Czech Republic and the Netherlands.
Developers are now considering their pipelines and whether to continue to build speculatively at the previously anticipated scale and pace. As developers slow their delivery to the market in response to falling occupier demand, availability is likely to remain constrained in the near term.