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Online Event – Logistics: ‘Rents and take-up are set to increase’

Take-up of logistics space and rents will increase as vacancy rates go down, delegates heard at Real Asset Media’s European Logistics Investment Briefing this week, an online event attended by 300 participants from 27 different countries. 

‘Supply dynamics are still very favourable to landlords,’ said Kevin Mofid, Director of Research, Savills. ‘We’ve seen spec developments fall, so grade A supply is likely to decline, which points to rental growth’. 

Savills research shows that a 12% vacancy rate is the point at which rents start to fall, and no European country is at that level. Copenhagen has the lowest rate at 2.1% and Madrid the highest at 9%, but most cities are at the lower end of the scale.   

‘The average vacancy rate in Europe has dipped below 5% for the first time on record,’ said Mofid. ‘In the UK the vacancy rate is 6.8%, so it would take 40 mln sq ft of supply to come to the market for the rate to go up to 12%’.

‘The average vacancy rate in Europe has dipped below 5% for the first time on record,’ said Mofid. ‘In the UK the vacancy rate is 6.8%, so it would take 40 mln sq ft of supply to come to the market for the rate to go up to 12%’.

Rent has also become less of a factor for occupiers. In a typical supply chain, logistics costs are just 10% of the total and logistics real estate accounts for just 0.75% of total costs, according to Savills. 

Obviously different types of occupiers will feel different pressures. Retailers with more robotics and automation, and therefore less reliance on labour supply, for example, will be even less sensitive to rental increases. 

Robert Dobrzycki, Chief Executive Officer, Panattoni Europe, Marcus de Minckwitz, Director, Omnichannel Group Savills, Stephan Riechers, Senior Investment Manager Logistik, Union Investment Real Estate GmbH. Ingo Steves, Managing Director, Gazeley North Europe and Kevin Mofid, Director Research, Savills (UK) discuss the current outlook for the European Logistics Real Estate Invesmtent Market. Event hosted by Real Asset Media.

But in general, ‘rent is less relevant,’ said Marcus de Minckwitz, Director, Omnichannel Group, Savills. ‘People are prepared to pay a significant premium to be in the right locations, precisely because of the problems in the supply chain highlighted by the coronavirus crisis’.

Industrial take-up is set to shoot up as e-commerce penetration across Europe increases, an existing trend that is being accelerated by the Covid-19 pandemic and the lockdowns imposed to try to contain it.  

Savills research has found a clear inflection point at 10.7% when rapid occupier demand for logistics space occurs. Many European countries, such as Austria, Ireland and Norway, are at or close to that point. It will take €194 bn of additional online retail sales to create demand for 15 mln sq ft of industrial space across Europe by 2023.

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