Garbe Pyramid: the era of steep rental rises in logistics is over
The era of steep rental increases in the logistics sector has ended but prospects for the asset class in the next five years are positive, delegates heard at the presentation of Garbe Pyramid 2025, organised by Garbe Industrial RE and Real Asset Media, which took place online yesterday.
“The era of rent stability has begun,” said Tobias Kassner, head of research and ESG, member of the executive board, Garbe Industrial Real Estate. “We can see the initial signs of yield compression, a sign that a new investment cycle is beginning.”
Garbe Pyramid is the only pan-European market overview of the sector, covering 121 regions in 25 countries, focussing on key indicators of the investment and rental market, which is updated every six months. The update presented yesterday covers the period from Q2 to Q4 2024.
After years of spikes in rents, as demand constantly exceeded available supply, prime rents rose by 6 cents to €7.36 in the last six months. Rents remained stable in 69 out of 121 regions, while 42 regions recorded increases and only ten experienced a decline.
“The overall picture is one of stabilisation, but there are marked differences between regions,” said Kassner. “The UK and Netherlands are leading the way and rental growth has started in the most constrained subregions. This means that established markets are best-positioned to capture growth in near-term.”
The highest rental increases were seen in West Brabant in the Netherlands, in Leeds in the UK and in Nuremberg in Germany. The steepest falls were in Lodz in Poland, in Riga in Latvia and in Kassel in Germany.
Garbe Pyramid’s research shows the initial signs of yield compression, the first since Q2 2022. Prime net initial yields compressed by 4 bps to 5.61% in the period, driven largely by interest rates.
Yields compressed in 46 out of 121 markets, “which means that the cycle of decompression has ended and confidence in the direction of future pricing has increased,” said Kassner. Cap rate compression was led by Benelux, Spain & high-yielding CEE.
“For a long time investment activity in the logistics sector was very broad across Europe, but now take-up is concentrated in a few markets,” said Kassner. “Given this market divergence, you need local teams on the ground. Real sector specialists are more critical for successful execution than ever.”