The first point to mention, similarly with the development and contribution for each of the country’s economies, is that their industrial and logistics real estate markets are all at different stages of maturity, both in terms of size and the pace of development. As a result of this, you will see that data for some markets are detailed at a national level, while others are more focused around the main economic hubs, typically capital or major cities with larger pools of labour. Each of the markets have their own strengths, but also areas for further development.
As the report will explore, some of the key challenges in this sector, revolve around a number of factors that include: the availability of land and property in locations that meet both the developers and end-user expectations, the availability and reliability of utilities (and increasingly data networks) and transport infrastructure, the availability and skills of the labour pool, EU membership and access to investment incentives, amongst others.
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Although EMEA’s rolling 12-month take-up was down - 8.4% Y/Y, activity over H1 2020 remained ahead of the same period a year ago. This 3.6% growth came with additional demand for servicing online retail being activated as our home delivery requirements soared during the COVID-19 lockdown. By June, space under active construction (UAC) had risen by only a marginal 1.8% (H/H), as many speculative developments were mothballed in the wake of COVID-19, or at least delayed or revised. This is expected to influence (negatively) upon future take-up volumes, especially in supply-bottleneck markets. The marginal increase in active construction was also the result of large development projects completing during the first half of 2020. While Istanbul (-81%), Dusseldorf (-76%) and Stuttgart (-67%) saw the largest (H/H) declines, little impact was seen in relation to their current vacancy rates - particularly Istanbul, which saw vacancy move in by -376 bps; further signifying demand severely outweighs new and available supply.
The weighted (average) vacancy rate for Europe remains a very low 3.7% - stable on Q1, and only a 10 bps increase on Q4 2019. This reflects that vacancy rates are bottoming out, with just 36% of markets recording vacancy contractions in H1 2020, compared to 45% in H1 2019. City-warehouse prime rents grew in 19% of the locations monitored during H1 2020. Some 17% of markets saw rents for logistics and distribution markets grow, primarily due to expansionary e-commerce demand. Overall, rents remained largely stable. This is set to continue for the next 12 months, bar core locations where rental growth is expected, albeit at a slower pace.
Landlord-favourable markets continue their prevalence across markets, but as of H1 2020 they were matched by neutral market conditions – both represent a 41% share of markets surveyed. This reflects an easing of landlord-favourable dominance of 51.5% in H1 2019. The outlook for the next 12 months depicts these conditions will remain largely stable although there may be a ceding of landlord conditions in some markets. Low vacancy, a lack of quality new availability and strong growth in e-commerce will be counterbalanced by broader economic uncertainty.