Demand for logistics space set to grow further across Europe

Companies have been diversifying their supply chains but there’s still a lot of demand for logistics space across Europe, Tobias Kassner, Head of Research, GARBE Industrial Real Estate, told Real Asset Media’s Richard Betts.

The year started on a high but after April investors took a wait and see attitude and prices started to change, he said: “In the top markets there are less deals happening, but in reasonably-priced markets like Italy we have seen ongoing yield compression”.

Looking ahead, demand for logistics space is set to continue not just this year but also next year for different reasons, Kassner said.

“We’ve seen record-breaking take-up levels last year and again this year, and while in 2021 it was mainly due to e-commerce this year it is different”, he said. “What we call bread and butter business is really going strong”.

Another reason for the continuing strong demand is that “we have not been able to develop as much new space as the market needs”, Kassner said. “This year project development is particularly difficult because of soaring construction costs, financing costs and due diligence. It is getting more and more difficult to get financing, so there will be less new space which increases the demand”.

Vacancy rates are already at record-breaking lows and, given the scarcity of product, rental prices are set to go up further, he said: “That’s exactly what we are seeing in many markets across Europe”.