Industrial and logistics investment volumes begin recovery across Europe
According to Savills latest European Logistics Outlook, investment volumes to date have totalled €26.1bn, a 14% increase compared to the same period in 2023. This signifies the second highest level of investment in European logistics assets since the market reached a trough in Q1 last year.
Savills notes that investment in the third quarter of 2024 reached its highest point this year, totalling €9.3bn, a 12% increase compared to the previous quarter and 23% higher than 2023’s figure. Although this remains below the five-year average, investment volumes remain solidly on track to surpass €36bn by the end of 2024, a projection based on the average distribution of investment volumes throughout the year.
On a country-by-country level, the largest increases in annual terms have been in Austria (+837%), the Czech Republic (+744%) and France (+146%), albeit this is coming off a very low base. In fact, Savills figures show that fourteen out of eighteen countries have seen an annual increase in investment volumes. In contrast, the markets seeing the greatest decreases were Greece (-89%), Norway (-62%) and Germany (-37%).
Notably, of the core markets the UK is performing the best, growing by 50% year-on-year with the €3.1 billion invested into the market representing a third of all investment this quarter. Savills believes this is key as Europe typically follows trends in the UK on a lag, which suggests a possible broader recovery in 2025.
George Coleman, EMEA industrial & logistics, comments: “We have seen a marked increase in stock coming to market in the UK during the Q4 transaction window, with the same trend carrying in to Europe, even if slightly delayed. There has been intense competition around the most liquid product type which signals a robust Q4 and generally a more positive sentiment forecast for 2025 in the EMEA market.”
Andrew Blennerhassett, associate in the industrial & logistics research team at Savills, adds: “While investment volumes have undeniably started to improve, we could caveat that the market is characterised by a high level of caution. Investors remain focused on the trajectory of take-up and net-absorption, and the underperformance in these metrics is hampering a strong increase in investment volumes. However, well located, long income assets and reversionary mid-box / light industrial, is garnering significant interest across Europe.”
Looking at the occupational market, activity receded in the third quarter with the fall in take-up greater than typically expected. Totalling 6 million sq m, this signified a decrease of 20% compared to the previous quarter and 22% below Q3 2023. However, when looking at the figures year to date, Savills has recorded 19.8 million sq m of take-up, a decline of just 8% compared to the same period in 2023 and 3% above the pre-pandemic average.
With Q4 accounting for 27% of annual take-up since 2019, Savills anticipates that by year end totals will fall just short of 28 million sq m compared to 29.7 million sq m in 2023.
Year to date, the biggest decreases in take-up were seen in Belgium (-65.5%), Dublin (-54.1%) and France (-54%), largely due to ongoing economic volatility. In contrast, Portugal, Spain and Budapest saw increases of 66.8%, 43.9% and 28.9% respectively. Savills notes that the majority of markets underperformed relative to a year earlier, with only Spain beating its five-year average.
What’s more, for the first time since 2022, the average vacancy rate across Europe has started to decline in Q3 2024, falling by 13bps to 5.86%. This follows several quarters of deceleration, and while the market appears to be turning the corner, it is important to note that the recovery is unlikely to be straight forward.
Sam Quellyn Roberts, global occupier services director, EMEA logistics markets at Savills, adds: “In regards to occupier type, anecdotally we are seeing an increase in requirements and greater demand from Chinese car manufacturers (including parts, battery storage and EV). This tracks with previous predictions that locations such as central and eastern Europe (CEE) would gain the most benefit from onshoring due to competitive labour costs and government incentives. In addition, we have also seen several 3PLs expanding their footprint and healthy activity amongst automotive, pharma, food production and retail occupiers across the region.”
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