Logistics & Industrial Rents in Europe

H1 2023 

However, rental growth has started to show signs of slowing: in the twelve months to Q2 2023, prime logistics rental growth averaged 13.8% across European markets, compared with 15.2% to Q4 2022. During the first half of 2023, prime logistics rental growth averaged 4.8% growth in the six months since Q4 2022, compared with 8.5% for the six-month period between Q2 2022 and Q4 2022.

Whilst slowing from the recent exceptionally high levels, the current rental growth of 13.8% for the year to Q2 2023 is still markedly above the pre-pandemic five-year average rental growth rate of 2.5% per annum.

Rental levels across European markets are either at or close to new record highs at end Q2 2023. Many locations have seen rents in the last twelve months increase by more than 10% and in some areas, particularly in the CEE, by significantly more. For example, in Poland, rental growth has accelerated significantly since the beginning of 2022 and, in the twelve months to Q2 2023, many locations have seen rents grow by more than 20%.

However, despite these recent uplifts in rental levels, many locations in CEE countries are still competitively priced relative to nearby markets in Western & Northern Europe. Many Southern European locations are also similarly competitive despite recently having experienced significant rental growth.

In many markets, we are also starting to see more conversations around tenant incentives albeit agreements still tend to be specific to each property and transaction. 

Landlords are also starting to be creative with tenant incentive packages and are in some cases including amortised fit-out as well as more traditional rent-free periods. Broadly, whilst headline rents are expected to continue to increase, landlords may start to offer tenants more by way of incentives as landlords look to secure income in an environment of slowing occupier demand.