European Logistics Market overview

European Logistics Market overview

September 2021

Market indicators are strong across Europe

26m sq m2020 take-up – a new annual

record

€39bn Record European investment

volume

As restrictions ease the economic outlook improves

Source: Oxford Economics

• Euro Area GDP growth is set to recover 4.6% in 2021, following a -7.6% decline in 2020.

• With lockdown restrictions easing economic growth will recover but will be volatile

• €1.9bn PEPP

• €1.8bn EU response

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Inte

rne

t S

ale

s a

s a

pe

rce

nta

ge

of

To

tal

Reta

il S

ale

s

Covid-19 has boosted the UK’s online penetration rate to 28%.

Source: ONS, Ecommerce Foundation, Eurosender, Forrester Research, Savills Research, full year 2020 data

In some countries online retail is forecast to double

0%

5%

10%

15%

20%

25%

30%

35%

40%

2019 2020 (F) 2025 (F)

By 2025 the average level of online retail

will be 25%

This will require an additional

26.3m sq mof warehouse

space

Its not just about online retail…...

• Savills, Property Week, and TritaxSymmetry survey shows that occupiers are considering re-shoring and increasing inventory levels

Savills Research estimate that for every £1bn manufacturing

investment - this creates a need for 175,000 sq ft of warehouse space

Correl: 0.88

This will see warehouse

demand rise in Eastern European countries

-

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019 2020 H1 21

Ta

ke

up

(sq

m

)

UK

Spain

Romania

Portugal

Poland

Netherlands

Ireland

Hungary

Germany

France

CzechRepublicBelgium

European logistics take up reached 18.3m sq m in H1 2021, 60% above the half year average.

Source: Savills Research using Forrester, Centre for Retail Research, ONS

• Germany (+26%), Netherlands (+64%) and Poland (+102%) performed the strongest against their five year H1 averages.

• Supply chain issues are creating new demand for warehouses in mainland Europe and the UK

On a per capita basis the Netherlands is out performing in 2021

-

0.05

0.10

0.15

0.20

0.25

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Sq m

take

-up p

er

capita

Take

-up (

m s

q m

)

Take-up Take-up per capita

0%

2%

4%

6%

8%

10%

12%

14%

2015 2016 2017 2018 2019 2020 H1 2021

European logistics vacancy rates (%)

Netherlands Denmark Czech Poland Madrid, ES

France UK Barcelona, ES Euro average

The problem however is supply

• Euro logistics vacancy rates remains at record lows.

• European logistics vacancy rates fell from 5.4% to 4.6% in H1 2021.

• Vacancy rates fell back in 2021 as new completions were absorbed.

• New spec development in Madrid lifted average vacancy rates during end 2020, although urban facilities remain undersupplied.

At the same stage in the

UK cycle vacancy was

12%

At 1.8% a year the European rental growth forecasts under value the relationship between supply and demand

Source: Capital Economics

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2021 2022 2023 2024 2025

Re

nta

l G

row

th %

yr/

yr

Austria Belgium Finland France Germany Greece

Ireland Italy Netherlands Portugal Spain Euro-zone

When supply is low and demand is high rents rise, as we have seen in the UK

Source: Savills

6.5

7

7.5

8

8.5

9

9.5

10

10.52001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Pri

me

qu

otin

g r

en

ts (

£ p

er

sq

ft)

Around London rents

have increased by

58%

More occupational demand means higher investment volumes

Source: Savills, RCA

• European logistics investment reached a record €22.5bn in H1 21, a 60% increase on the H1 five year average.

• UK (+115%), Ireland (+1008%), Netherlands (+66%) and Spain(+212%) performed the strongest against the five year averages.

• The UK accounted for 37% of deal volumes.

Yields will continue to compress across the continent

Source: Savills

• The weight of capital targeting European logistics has compressed average prime yields by 45bps yoy.

• UK (-75 bps), France (-75 bps) and Germany (-60 bps) observed the largest compression.

• Investors seeking development partners to gain exposure to the sector.

• Lending to standing stock remains available.

Thank you

Kevin Mofid

Director: Research

[email protected]

0203 618 3612

@kevtheeshed

@kevin-mofid

https://twitter.com/Kevtheshed

https://www.linkedin.com/in/kevin-mofid

© Analytiqa 2021

Presentation :

European Logistics Census, September 2021

© Analytiqa Associates 2021

European Logistics Census: Research Respondents

• 1st edition of research into the attitudes and confidence of property professionals across Europe

• Over 400 responses across all segments, Summer 2021


• Whilst almost three-quarters of developers have seen an upturn in business, less than 40% of occupiers share that view

Understanding the Impact of Covid-19

• More than half of respondents have seen an increase in business during the pandemic


Covid-19: Lessons Learned

• Mitigating risk by shortening supply chains, holding more inventory and increasing resilience and flexibility

1 Shortening (re-shoring) of supply chains

2 More staff home working

3 Increasing capacity to facilitate online business

4 Increasing the quantity of stock held

5 Improved IT systems

6 Reduction in reliance on imported materials

7 Redesign of facilities to account for social distancing


Current Trading Conditions

• Almost two-thirds of developers view current trading conditions as more favourable than they were six months ago

Business sentiment reflects polarised opinions

Share of respondents that perceive current business

conditions to have deteriorated, compared to the start

of 2021

27% of Asset Managers

24% of Investors

21% of Occupiers

17% of Developers

• Amongst occupiers, retailers are the considerably more optimistic audience group, with logistics providers marginally ahead of manufacturers


Challenges Facing Property Operations Rankings by respondents

Occupiers

1 Rising rents2 Lack of building supply3= Employment3= International trade

Developers

1 Lack of building supply2 Zoning / permitting systems3 Employment

Investors

1 Lack of building supply2 Zoning / permitting systems3 Employment

• Across all property professionals, and excluding Covid-19, the lack of supply of new buildings is by far the most important challenge facing the sector


• 95% of occupier respondents (UK, 2021: 89%) expect to require more or the same warehouse space within the next three years

Occupiers: Demand for Warehouse Space


• Over one-third of occupier respondents that are expecting to increase warehouse space over the next three years will be considering ‘mega-box’ facilities

Occupiers: Warehouse Footprints Rankings by respondents

Logistics

1 Mid-box2 Mega-box3 Urban

Manufacturers

1 Mid-box2 Mega-box3 Urban

Retailers

1 Mega-box2 Mid-box3 Urban


• Over 40% of occupiers expect their companies to be increasing their warehouse footprints in France and Germany

Occupiers: Demand for Warehouse Space By Country


Occupiers: Importance of Warehouse / Real Estate Features

• Cost (always) matters above all else • Environmental features are increasingly important


Industrial and Logistics Take-Up

• 81% of agents and 79% of all other property professionals expect to see rising take-up of industrial and logistics property across Europe in the next 12 months


Industrial and Logistics Investment Volumes

• 80% of investors and asset managers forecast rising investment volumes in the next year, with investors more positive than asset managers


• France, Germany and the Netherlands feature prominently as areas for investment, where companies are not already active

Future Plans for Investors and Asset Managers

… Occupier Intentions


Factors Impacting Investment Criteria

• For investors, building location and covenant strength are the most important factors influencing

investment selection criteria


Thank you for your time

“Analytiqa assists clients across the global supply chain to recognise growth and profit in challenging and competitive markets.”

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W: www.analytiqa.comE: [email protected]

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For questions, comments and feedback, please contact us:

Mark O’BornickDirector

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Documents

European Logistics Market overview