Growth will remain with increased risk provisioning on the part of investors. As a result, we expect prime yields to compress by 30 bps by 2026 to reflect the resilience of the best assets. For example, a logistics transaction volume of 8.5 billion was recorded in Germany and 3.5 billion in the UK. This in turn is exerting further rental growth, comments. The manufacturing sector is becoming less dominant due to rising energy prices and CO2 tax prices. The shortage of new space has an impact on demand. This would be 18% higher than the five-year average, but the final figure is likely to fall short of this level given the deteriorating macroeconomic situation in Q4. Portfolio premiums of between 515% are now being achieved on portfolios that allow investors to deploy large amounts of equity in a single transaction, such is the volume of frustrated capital seeking to gain exposure to the sector. Indeed, vacancy tightened across Europe, with the exception of two markets where vacancy rates increased: with the vacancy rate rising to 4.9% in Budapest (+130 bps) and rebounding from a series low in Dublin to 1.4% (+80 bps). We have entered a period of price discovery, but because the flow of deals remains muted due to the spread between expectations of buyers and sellers, transactional evidence for new market prices remains sparse. No location in Europe has fallen below the 3% mark and will continue to do so for the foreseeable future.- The continued strong demand for logistics properties is also reflected in the transaction volume within the individual countries. Savills | European Logistics Outlook - September 2021 Private individuals have been among the major sellers of space this year, who are seeking to cash in on the aggressive yield compression which has been observed over the last 24 months. After marking its space in information technology and biotechnology, Karnataka has placed its bets on aerospace and expects to attract industries that by 2017 will invest $ 5 billion (around Rs. In the Netherlands, the market is still recording strong activity despite a decrease in H1 2022 compared to the record volume reached last year. The weight of capital targeting European logistics has compressed average prime yields by 27bps to 4.20% over the last six months. It fell for the week, breaking a three-week winning streak. Indeed, the record-breaking YTD take-up in Q3 2022 was almost entirely a result of the exceptional take-up numbers from H1. Europes economies continue to show a positive recovery, with improving GDP growth forecasts, albeit the Delta variant will continue to pose headwinds to the positive momentum. Will Logistics Continue To Be The Favorite Asset Class For Investors It isnt just online retail driving things forward, however, as manufacturing companies get to grips with a post-Covid supply chain and consider moving towards a 'just in case' supply chain, rather than 'just in time'. Updated share price information for Savills Plc from London Stock Exchange. Although the yields are softening across Europe, they remain well below those recorded pre-pandemic; 5.57% (Q3 2018) and 5.04% (Q3 2019). Furthermore, despite disposable incomes declining, consumer spending growth, which is expected to slow, will remain positive, falling from 3.6% in 2022 to 0.3% in 2023 before growing by 2.6% over the following two years. This translates to an increase of 21bps compared to . One big shift we have observed is that landlords are no longer willing to sign beyond a five-year contract as continental rents are more frequently index-linked and landlords are anticipating that rents will increase far above that of CPI. Learn more about Savills Plc's leadership, corporate governance and sustainability policy. The Intelligence Lab Global property market insight EUROPE European real estate outlook 2023 Brought to you by our local experts, the European real estate outlook provides a high-level summary of our view on the European economies and real estate markets in 2023. At Savills, our most valuable resource is our people. Whilst speculative development is taking place across the continent, many developers are struggling to source concrete, timber, steel, and cladding, which are the key components of any new warehouse. In, Cushman & Wakefield. France (+117%) and Spain (+76%) also experienced strong growth, while momentum slowed in the Czech Republic and Hungary with no transactions in Q3, while declines were recorded in Romania (-69%), Netherlands (-66%), and the UK (-46%). According to the Federal Reserve Bank of New Yorks Global Supply Chain Pressure Index (GSCPI), disruption peaked in December 2021 at 4.3 standard deviations from its average and has since declined to 1.0 standard deviation. In Poland, following a record volume last year, activity slowed down in H1 2022. EUROPEAN OFFICE RENTAL GROWTH REACHES SIX-YEAR HIGH - Cushman & Wakefield In Germany, the logistics market ran at full speed to reach a new record volume of transactions in H1 2022 boosted by large transactions from manufacturing companies. That said, investment volumes in Q3 2022 are strong relative to their pre-pandemic levels and were 28% higher than the Q3 five-year average. Currently, the Netherlands leads the way in Europe, with 82,000 public recharging points, followed by Germany (49,000) and France (46,000). According to estimates, European logistics take-up in Q1 2023 amounted to 7.0 million sq m, reflecting a 16% decline compared to the five-year Q1 average. Most markets (32 out of 41) showed no growth over the quarter. Prime yields were flat or on an upward trajectory in most markets this quarter, with the average prime yield for European industrial and logistics assets rising to 4.80% during the first . In Q2, the market dropped by 16% compared to the previous quarter. In the overall view, there continues to be an impressive market constitution in Europe. Returns are coming under pressure due to softening yields. Looking further ahead, rising building costs and market uncertainty will likely dampen construction activity in already constrained construction pipelines. In Spain, the volume of investment decreased sharply in H1 compared to the outstanding year 2021. Prime yields edged up in Q3 2022, with exception of Romania (tightening) and Portugal (no change). Romania (87%), Ireland (37%), and Hungary (15%) saw the highest growth in take-up in the first three quarters compared to the same period last year, while declines were sharpest in Denmark (-40%), Spain (-17%), and France (-14%). At Savills, our most valuable resource is our people. Overview and forecasts on trending topics, Industry and market insights and forecasts, Key figures and rankings about companies and products, Consumer and brand insights and preferences in various industries, Detailed information about political and social topics, All key figures about countries and regions, Market forecast and expert KPIs for 1000+ markets in 190+ countries & territories, Insights on consumer attitudes and behavior worldwide, Business information on 70m+ public and private companies, Detailed information for 35,000+ online stores and marketplaces. Abu Dhabi National Oil Co. sold 1.41 billion shares . Nevertheless, the logistics real estate market will face reshoring, nearshoring, and effects of the war in Ukraine in the coming months. Through many monarchs and several economic cycles, we've become the international adviser of choice across every aspect of property. While they are not vital for the website to run, they allow us to remember important information and your preferences such as previous location searches. Savills analysis of new capital raised by funds indicates that 39% of the volume of new funds raised in 2021 has been allocated towards the logistics sector, more than any other sector. In France, after a strong start to the year boosted by demand for large warehouses, the market slowed down with 710 000 sqm taken up in Q2. Watch the webcast from the annual results presentation held on 16 March 2022. Secondary rent costs for warehouses in the logistics market in Europe as of Q4 2015; In September, Russian state-owned energy company Gazprom announced that its exports to the non-Commonwealth of Independent States (e.g., Europe) had fallen by 38.8% YoY, which has applied upward pressure on commodity prices. Regional Investment Advisory EMEA Omnichannel Group, Commercial Investment Tenants are no longer being offered renewal options as landlords test the market for the anticipated 45% pa rental growth. There have been changes in yields and rents over the past 6 months. However, the fall in penetration rates was most marked in those economies with the highest penetration rates, such as the UK, Germany and the Netherlands. All rights reserved. The prospects of a softening economy with weaker rental growth prospects and higher default risk will have a greater impact on secondary markets and investors will demand a higher spread. Despite inflationary pressures and economic headwinds, occupier market fundamentals remain strong, with positive rental growth expectations underpinned by a continued demand-supply imbalance. Catella is a leading specialist in property investments and fund management, with operations in 12 countries. Forecasts show global merchandise trade will grow by 3.0% YoY in 2022 before declining by 1.0% YoY in 2023 a sharp downward revision on the growth of 3.4% previously forecast. Heightened interest rates are also impacting corporate borrowing rates and as rates rise, the impact will become more acute. European prime logistics . Whilst growth was strongest in Romania (175%), Ireland (107%), and Hungary (52%) over the period. Spotlight: European Logistics Outlook - February 2022 - Savills Investment volumes totalled 42bn in Europe in the first three quarters of 2022, an increase of 2% on last year, which saw a series high for the period, and 50% above the five-year average. Examples of this include: setting your privacy preferences, logging in to your Savills account, or filling in forms. A paid subscription is required for full access. Owner-occupiers wishing to raise capital may find borrowing costs prohibitively expensive and may look to offer up their facilities through sale-and-leaseback arrangements as an alternative. These cookies are necessary for the Savills website to function. Overall, the euro area is forecast to see 4.6% growth in 2021, up from -6.7% in 2020. After almost a decade of cheap capital, rising interest rates have driven up borrowing costs, leaving the commercial real estate sector to adjust to the growing costs of debt. At a Glance - European Capital Markets - Q4 2021 Some 36% of consumer transactions were settled using physical money last year, according to a Swiss . The prime yield dropped to 3% in the main markets. Savills plc, incorporated and registered in England and Wales. Households assessments of the future general economic situation, their future financial conditions, as well as their intentions to make major purchases, all remained resilient. See below for further information about the categories of cookies used on our site and your current preference settings. For more information about how we and our partners use cookies on our site, see our Cookie Policy. The occupier market proved resilient in H1 2022 even though the first signs of slowdown were recorded in Q2. Eurozone unemployment sits at 7.7% in June 2021, which has risen by 120 bps since end-2019 and remains supported by furlough schemes across the majority of European markets. While activity was reduced in Q2, it nonetheless remained strong with nearly 1.2 million sqm taken up. Savills | Spotlight: European Logistics Outlook - May 2023 The prime rent increased by 7% in Germany during Q2 2022. Rent-free periods on a five-year lease are generally only around two months, whilst fit-out contributions from landlords have been withdrawn due to the market dynamics. The sector maintained a strong market share over other asset classes in most countries, accounting for 24% of total commercial real estate in Europe. Savills | Spotlight: European Logistics Outlook - June 2022 Up-to-the-minute news from our press teams providing the latest developments within Savills, and across the property industry. However, the lessons occupiers have learned from the last two years are likely to coalesce in a structural shift in the market. Use Ask Statista Research Service, Prime rent costs for warehouses in the Netherlands 2014-2022, by city, Primary rent costs for warehouses in the logistics market in Germany 2014-2022, Average annual cost of industrial rent per square meter in Europe Q1 2022, by country, Primary rent for warehouses in the logistics market in the UK 2014-2022, by city, To download this statistic in XLS format you need a Statista Account, To download this statistic in PNG format you need a Statista Account, To download this statistic in PDF format you need a Statista Account. Insight & Opinion is our hub for residential, commercial and rural articles and research from experts offering industry-leading advice and analysis. Examples of this include: setting your privacy preferences, logging in to your Savills account, or filling in forms. Road transport accounts for over 70% of the total transport greenhouse gas emissions, and 70bn of EU funding is available through the European Structural and Investment Fund, including 39bn to support the move towards low emission mobility. Information on upcoming and previous Annual General Meetings. Find out more about upcoming and past financial events, including results announcements and ex-dividend dates. The yield on the 10-year note settled at 3.691%, compared with 3.607% Thursday. While activity was reduced in Q2, it nonetheless remained strong with nearly 1.2 million sqm taken up. After several years of accommodative monetary policy with deposit rates close to or below zero, central banks have reacted to sharp inflation by swiftly tightening their monetary policy. A selection of highlights, comments and data from the company's latest results. Logistics is more attractive on that basis than most European office and retail markets. H1 set another half-year historical record level of investment, even with a slower Q2. download pdf OVERVIEW Industrial real estate supports one of the most vital components of the global economy today - logistics. These cookies are necessary for the Savills website to function. Growth will remain with increased risk provisioning on the part of investors. European logistics take-up reached 18.7m sq m in H1 2021, 63% above the half-year average. Prime yields. Frankfurt am Main, 5 June 2023. "Prime Yields of Industrial and Logistics Real Estate in Europe as of 1st Quarter 2022, by Country or Region. We anticipate a marginal reduction in annual e-commerce penetration growth rate as several restrictions have been lifted, although some consumer habits will remain. May 31, 2023, 4:23 p.m. It has risen to 139bps at the end of Q4 2022. Prime European logistics facilities will remain in high demand throughout 2020 as ecommerce growth accelerates > Insight & Opinion European Logistics Outlook - September 2021 Publication Spotlight: European Logistics Outlook 07 September 2021 Article Contacts & Related Research With over 65 bn invested during 2021 in industrial and logistics, the market set a new record compared to last year. Unlike other European markets, prime yields remained stable but signs of decompression are expected in Q3. The occupier market has shown good resilience during H1 2022, despite a difficult political and economic environment. Competition between occupiers for high quality buildings remains sharp, implying some prospects for rental increases in prime locations. We may also use information recorded by these cookies to see how well these adverts are performing. Our forecast for 2022 is a transaction volume of 59 billion. Given the financial context with rising interest rate, prime yields decompressed by 10 bps in Q2 to 3.10% in the main markets. Investment volumes across Europe slowed in Q3, with a total investment volume of 9.7bn, falling by 4% QoQ and 16% YoY. Depending on the country, European government bonds have spiked by 100-200 bps over the last three months. Prime yields of European logistics real estate declined by 7.1% on average by Denise Moose The prime yield of the European logistics market declined by an average of around 7.1 percent compared to the prior-year period, whereas rents rose conversely by a modest 2.2 percent. In the UK, take up for H1 2021 was 82% above the long-term average, driven by demand for units between 10,00020,000 sq m from online retailers taking smaller parcel delivery style units. Supply chain disruptions from Covid continue to reverberate throughout the global economy. Though these cookies cannot be switched off, you can set your browser to block or alert you about these cookies, but please be aware that this will stop some parts of the Savills website from functioning as intended. Prime logistics yields for London now stand at 5% and prices in the UK are now showing signs of stabilisation. One mitigating factor has been a dramatic shift towards reshoring/nearshoring in the last year. Prime European logistics facilities will remain in high demand throughout 2020 as ecommerce growth accelerates, Historically low vacancy rates are insulating rental growth against a cool-down in the occupier market and wider economy. We've grown a lot in 160 years. In-depth research and analysis into property market trends, forecasts from our specialist research teams, and market-leading commentary to help you make the right property decisions. Vacancy rates for logistics space across Europe continue to creep downwards given the constrained land, particularly in western Europe. If inflation does persist, it will continue to erode household incomes which will in turn impact demand, particularly for larger purchases. Delivery hai? Prime shopping centre yields widened by 120 bps since 2018. Europe looks particularly vulnerable: the Tradeshift Index of Global Trade Health shows that trade transaction volumes in Europe fell three times faster than that of the US as energy costs weighed on demand. The euro area consumer confidence indicator was confirmed at -4.4 in July 2021, the highest level since 2018. Find out more about upcoming and past financial events, including results announcements and ex-dividend dates. This has resulted in shrinking the spread, or premium offered by European industrial real estate relative to bond yields. At the end of Q4 2021 it was 0.28%, by the end of Q4 2022 it was 3.00%, a movement of 272bps. The positive sentiment in the occupational market is continuing to encourage capital deployment in the sector. With rental levels in many European markets rising and yields continuing to fall and show further downward pressure, many commentators are starting to ask how far can both metrics go? We provide a full range of property-related services across a range of sectors from retail and hospitality through to healthcare and industrial. 14.09.2022 Category Business The occupier market proved resilient with TAKE-UP IN THE six LEADING COUNTRIES rising BY 13% TO 14.9 MILLION SQM ANOTHER half-year historical record level of investment in Industrial and logistics with 30 bn invested Europe: prime yields of large warehouses 2022 | Statista On the other hand, occupiers are still seeking more space to secure their supply chains and facilitate expanding inventories. News and announcements relating to Savills plc. Vacancy rates in major European cities have fallen by an average of 80 bps since the start of the year and remain at record-breaking lows. Please create an employee account to be able to mark statistics as favorites. Kevin Mofid, Head of European Logistics Research, examines the trajectory for rents and yields in Europe. See below for further information about the categories of cookies used on our site and your current preference settings. Currently, we would like to give you an overview of Q3 2022 and the expectations for the logistics markets in Europe - as always in a comparative overview, with a total of 115 regions. European Logistics Reaching a Turning Point | AEW Porter | LinkedIn Commercial Research, UK & EMEA Logistics Research Analyst Take-up in Europe fell by 23 per cent year-on-year in the first quarter of 2023. As a result of the steep increase in government bond yields, logistics prime yields shifted by 10 bps in Q2. As vacancy has tightened in recent years, competition for limited stock has intensified amongst occupiers allowing landlords to command higher rents for their properties. Stock Market News, June 2, 2023: Dow Jumps 700 Points After May Jobs The UK recorded the strongest change with over 25% growth over one year in Birmingham and London. Development appetite remains positive across all locations, and we are seeing secondary assets trade more freely now, including those with vacant possession. The change in interest rates has led to a disconnect between buyers and sellers. More electric charging points will need to be installed in order to meet the EUs climate neutrality target by 2050 and ensure retailers can meet the rising demand for online delivery. This will mean that for the online retail sector alone an additional 26.3m sq m of warehouse space needs to be found. Nevertheless, the logistics real estate market will face reshoring, nearshoring, and effects of the war in Ukraine in the coming months. Declines in take-up compared to Q3 2021 were sharpest in Denmark (-71%), France (-41%), and the UK (-39%). occupier market maintained solid dynamics after the exceptional volumes recorded last year. Savills forecasts European prime office and logistics yields to reach a record low this year 25 May 2021 On average prime European CBD office yields moved in slightly in Q1 2021 by 4 bps yoy to 3.58%. The staycation concept has extended to holiday clusters between European countries. The vacancy rate is at its lowest ever, below 4% on average in Europe, whilst rising inflation is impacting construction and material costs. ", Cushman & Wakefield, Prime yields of industrial and logistics real estate in Europe as of 1st quarter 2022, by country or region Statista, https://www.statista.com/statistics/858167/prime-industrial-yields-by-european-country/ (last visited June 06, 2023), Prime yields of industrial and logistics real estate in Europe as of 1st quarter 2022, by country or region [Graph], Cushman & Wakefield, May 12, 2022. Indeed, as the cost of living rises, it is increasingly likely we will see disruption to trade in the form of strike action stemming from labour disputes. European logistics investment reached a record 22.5bn during H1 2021, a 60% increase on the H1 five-year average. Our integrity, honesty and professionalism is what gives our clients, colleagues, investors and business partners the confidence to work with us. Manufacturing also rose from 8% of take-up to 15% YoY in the UK, as the economic recovery begins to take shape. If we start to see companies bringing manufacturing processes closer to home and increasing the amount of inventory held to mitigate for delays then it is also likely that manufacturing companies will start to require more warehouse space too. By Mark Landler. Since our last market survey in March 2022, prime rents for logistics properties have risen by an average of over 1.5% across all 115 markets surveyed.- The increase was particularly significant in Rotterdam-Maasvlakte (+44%), Antwerp (+17%) and Brussels (+10.20%).- Due to the new risk assessment on the European commercial real estate markets, the yield compression of recent years has come to an end. . Commercial Research, European Commercial Research Take-up in the 6 leading countries rose by 13% to 14.9 million sqm. More than two thirds of markets saw yield compression over the past 12 months, with France (-63bps) outperforming all other regions. The Czech Republic (2.4%), Denmark (2.6%), Barcelona (3.3%), Oslo (3.8%) and Helsinki (4.3%) remain the most undersupplied markets. At a Glance - European Capital Markets - Q2 2021 PDF - 1.2Mo CONTACT INTERNATIONAL RESEARCH Development activity is not keeping up with demand, constrained by access to labour, rising material costs and supply chain challenges impacting speed of delivery. The ensuing supply shock drove up energy prices which were one of the primary drivers of the high rates of inflation that have dominated public discourse and monetary policy this year. Sweden hardened by 65 bps, Finland and Italy by 40 bps and 35 bps, respectively. Prime European logistics rents grew on average by 5.2% over the past 12 months, the fastest year-on-year rate in over two decades. Whether buying a townhouse or selling a country cottage, leasing corporate office space or renting farmland, our experts make it their business to understand your needs and help you find the right property. EUROPEAN LOGISTICS REAL ESTATE AS AN EFFECTIVE HEDGE AGAINST INFLATION The common wisdom is that as a real asset, property, and logistics property within it, ought to provide a good hedge against inflation, i.e., its income stream/value should keep up with the nominal rate of inflation. While leasing activity has shown signs of slowing, the historically low levels of available space are likely to continue to support rental growth in the short term. Our latest edition of Impacts, themed reconnect, explores how real estate is fundamental in helping people and businesses to connect and thrive. In this scenario, as economic turmoil abates and the European economy returns to growth, the pre-existing supply issues will have intensified, driving sharp rental growth as occupiers look to expand their footprints in response to rising demand. A lower standard deviation from the mean suggests global supply chain pressure may be normalising. While rental growth is broadly anticipated to outpace inflation, this will not be the case for all assets/markets and the margins are likely to be narrower than we have seen in recent years. Germany (3.9m sq m, +28%), the Netherlands (3.9m sq m (industrial and logistics), +64%) and Poland (3.4m sq m, +102%) performed the strongest against their five-year H1 averages. This statistic is not included in your account. Prime yields of industrial and logistics real estate in Europe as of 1st quarter 2022, by country or region [Graph]. Visiting address: Riddargatan 7APostal address:P.O. We provide a full range of property-related services across a range of sectors from retail and hospitality through to healthcare and industrial. Getting a good inflation hedge (via good indexation clauses), accessing reversion and active asset management will therefore be crucial to driving returns over the next few years. In April 2021, it secured INR 150 Cr (around $20.12 Mn at then exchange rates) from RattanIndia Group to expand its footprint in India and the South Asian market. For more information about how we and our partners use cookies on our site, see our Cookie Policy. All of this raises the question: Will slowing momentum from an occupational standpoint continue towards the years end, and for how long? June 2, 2023 11:55 am ET. We are observing rising demand for last-mile and food delivery space across larger conurbations from quick commerce companies like Gorillas, Picnic and Flink with fast access to a wide consumer base. Similarly, freight costs which rose dramatically during the pandemic continued to move back towards their long-run average in November 2022 and are now 73% lower than their peak in September 2021. The net prime yields for warehouses over 5,000 square meters in Poland picked up in 2022, after hitting record-low in 2021. Peaking inflation would suggest that central banks could start to cut interest rates, although this is less likely until the full impact of rate rises has taken place. Savills plc is a holding company, some of whose subsidiaries are authorised and regulated by the Financial Conduct Authority (FCA), https://www.savills.com/research_articles/255800/318128-0. Investor demand remains strong even though the volumes may be challenged by increasing scarcity of stock, geopolitical risk in Central and Eastern Europe and the suppression effect of inflation on consumer demand, analyses, +33 (0)1 55 65 22 08 / +33 (0)6 37 78 12 17, Suppliers: BNP Paribas is committed to its partners and suppliers. Investors are also increasingly turning to developers to form joint ventures to gain access to the logistics sector and as a way of hitting their return criteria, albeit the spread between investment and development yields is being eroded. Looking forward, record volumes of new capital are being raised and allocated towards logistics each month.
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