European logistics & industrial demand 9% up on pre-covid

Take-up of industrial and logistics space across continental Europe totalled 28.8 million sq m in 2023. Although this was down 24% on the 2022 figure, take-up remains 9% above the five-year pre-pandemic average according to Savills.

This suggests higher levels of activity relative to the previous decade despite the last two years’ cooling off, the firm stated in its latest European Logistics Outlook..

In the final quarter of 2023 8.1 million sq m was leased. This was 7% down on Q4 2022. Nevertheless, the occupier market looks to have stabilised in the last three quarters according to Savills and is now on an upward trajectory. The second half of the year was 17% up when compared with H1.

Comparing countries, Romania (+595%), Portugal (+196%) and Belgium (+42%) performed best in relation to their pre-pandemic averages with declines in the Netherlands (-22%), Germany (-12%) and the UK (-7%).

Only Belgium (+9%) and Dublin (+5%) experienced annual growth, with record levels of take up in Belgium in 2023.

Notable falls occurred in the Czech Republic (-38%), the UK (-38%) and Germany (-29%).

“There have been considerable shifts in take-up relative to the five-year average,” said Andrew Blennerhassett, associate in Savills European industrial & logistics research team. “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.”

On the supply side, the average vacancy rate across Europe rose by 205bps to 5.37% in the final quarter of 2023. Savills said this this will inevitably put pressure on rental growth, although there is significant variation across Europe’s markets at the city and national levels.

The slowdown in construction has resulted in a deceleration in the increase in vacancy rates in Q4 –up 11bps, which was 83% lower than the previous three quarters.

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.

European industrial and logistics investment transaction volumes for 2023 totalled €27.5 billion, down 51% year-on-year, highlighting a sharp fall in activity. However, there was an increase of 13% between the first and second half of the year as investor sentiment improved, Savills said.