Logistics and Industrial Sector in Europe

Growth in the industrial and logistics sector

“The investment sector has seen notable growth of 9% year on year in the first half of 2024, driven by renewed investor confidence, which has begun to mobilise previously idle capital, with a particular focus on the industrial and logistics sector in Europe.

Although space take-up reached close to 11.4 million square metres over the same period, a 7% decrease on the previous year, the decline is slowing. This suggests that the market may be approaching a turning point.

Despite the challenges in occupancy, leasing activity in the second quarter rose 12% compared with the previous quarter, standing 14% above the 2015-2019 average. However, construction has slowed by 20% year on year, which has helped the weighted average vacancy rate in Europe keep climbing, reaching 4.8% in the sixth consecutive quarter of increase. Despite this, the rise is expected to be temporary, with occupancy levels forecast to normalise towards 2025, reinforcing the upward trend in prime rents across Europe.

In the second quarter of 2024, more than €7.1 billion was invested in industrial and logistics assets in Europe, lifting total first-half investment to €13.4 billion. Favourable conditions, with stable yields, controlled inflation and the interest rate cuts in June, have reactivated capital that had been waiting on the sidelines. Particularly noteworthy is the return of large deals, including portfolio transactions, and, more recently, the participation of key investors in smaller-scale deals (between €50 million and €70 million).

Looking ahead to the second half of 2024, we identify three key trends to watch:

1. Diversification of investment flows: A strengthening is expected in the direction of investment towards a broader range of assets, from core to value-add.

2. Refurbishment and redevelopment of industrial areas: With the gradual improvement of leasing markets expected towards 2025 and the reduction in the supply of prime assets, developers and occupiers will begin to focus on refurbishing older buildings and redeveloping strategic locations.

3. Sustained rental growth in prime areas: Although growth will be more moderate, the combination of better occupancy conditions and a limited supply of modern space will keep up the pressure on rents in the most sought-after areas. In markets with more vacant space, secondary rents will continue to lag behind the performance of prime areas.”