Shedmasters 2024: Positive market fundamentals driving growth in European logistics and industrial property market

The European industrial and logistics markets are experiencing robust growth, with positive trends in take-up, vacancy rates, and investment volumes, according to insights presented at the annual Shedmasters conference held recently in Amsterdam.

Kevin Mofid, Savills’ Head of Industrial and Logistics Research, highlighted the encouraging market fundamentals that are propelling the sector forward. “The European logistics market is entering a new phase, with improving investment volumes and stabilising vacancy rates,” he said.

“This is creating significant opportunities for growth and development in the industrial property market.”

Mofid’s presentation illustrated the strong performance of the occupier market, with take-up rates outperforming pre-pandemic levels, telling the audience that “In 2023, we saw 28.8 million square metres of take-up, indicating a healthy demand for logistics and warehouse spaces across the continent. Despite economic challenges, the vacancy rate has stabilised at 5.85%, up from a record low of 3.2%, reflecting a balanced market.”

Investment in the logistics sector continues to surge, with Q1 2024 seeing a 36% increase in investment volumes compared to the previous year. “The industrial share of investment volumes is at its highest-ever level, demonstrating strong investor confidence in the sector,” Mofid noted.

“Prime yields have moved out by just 5 basis points in Q1 2024, underscoring the resilience of the market.”

Mofid also addressed the broader economic factors influencing the sector. “An improving economic outlook, combined with stabilising interest rates and sustained e-commerce growth, is driving demand for logistics properties. The Eurozone imports rose by 2.4% in Q1 2024, and core inflation has reduced to 2.9% as of May 2024, contributing to a favourable investment climate.”

While the focus remains on market fundamentals, Mofid acknowledged the role of technology and data centres in shaping the future landscape. “As AI technologies evolve, the demand for advanced data centres is rising, necessitating enhanced infrastructure and specialised cooling systems. This, in turn, will drive rents in the logistics sector as it will reduce the overall development pipeline for new warehouses.”

Concluding his presentation, Mofid expressed optimism about the future of the logistics market. “With sustained growth in e-commerce, increased investment volumes, and stabilising vacancy rates, the European logistics sector is well-positioned for continued success. The future holds significant opportunities for development and expansion in the industrial property market.”

The Shedmasters audience also heard from Thierry Malleret, managing partner of the Monthly Barometer and Summit of Minds, who delivered a compelling presentation on the interconnectedness of global risks and their impact on businesses.

Emphasizing the importance of understanding macroeconomic, geopolitical, environmental, societal, and technological trends, Malleret informed the audience that “Interest rates are expected to remain high, influencing various economic activities.” He also noted the trend towards near- and friend-shoring as companies focus on securing their supply chains closer to home and projected a decrease in energy costs in the medium and long term, providing relief to industries.

“While technology offers bright prospects, it also poses significant disruptive challenges,” Malleret concluded.