Take-up: good momentum again in the first half of the year
After the record volumes of take-up achieved in Europe over the past three years, it is not surprising to see a market slowdown during the first half of 2018. In 20 cities monitored by BNP Paribas Real Estate, the volume of take-up dropped by 14% in H1 2018, yet the market is sustaining a high level of activity.
The main factor contributing to this positive market dynamics is GDP growth in the Eurozone (2.2% this year and 1.7% in 2019 according BNP Paribas’ forecasts), supported by domestic demand, manufacturing output and international trade. E-commerce activities also stimulated market growth in the main European logistics hubs. This sector recorded a 14% increase in Europe in 2017 and is expected to further enjoy a two-digit growth in 2018.
Germany and the Netherlands recorded another good start to the year with strong activity, while in France, following strong growth for 3 years in a row, the market went down during the first half of 2018. The UK market remained dynamic with 1.6 million sqm taken up in H1 2018.
In this favourable context, investors and developers’ confidence stimulated new construction including speculative developments. Yet, supply is still barely keeping pace with demand especially for large units, with vacancy rates below 5% in Spain, the Netherlands, Poland, the Czech Republic.
Considering the chronic lack of supply, the effect on rents has been fairly modest, increasing by just 8% over the past five years. In the first 6 months of 2018, rents rose by 2% in the main European markets Europe with some significant growth in Milan, in Berlin and in UK regional cities.
European industrial and logistics investment activity is still thriving in H1 2018
The European investment for industrial premises and warehouses naturally adjusted down after the exceptional volumes achieved in 2017, boosted by the sale of major portfolios and large corporate deals such as Logicor. This impacted most European countries though the adjustment down did not undermine strong activity in H1 2018. Indeed, the market for industrial and logistics premises reached its second highest mid-year volume of investment with €14bn recorded during the first half of 2018.