08 February 2012

News : Strategic Property

European space uptake exceeds expectations

Published:: 01 February 2008
Article Type:: News
Byline:: Liza Helps

Speculative construction in the warehouse sector has increased across the continent, but this is not great news as there is not expected to be large-scale development due to the risks which only a few large players in the development market can bear. However, rents across most European cities remained stable towards the end of 2007.

According to developer Goodman, the uptake of warehouse space across Europe in 2007 was higher than expected - some three million sq m in the main cities, which is up 17 per cent from the same period the previous year.

Eight out of the 14 cities covered recorded a higher uptake during the first nine months compared with the previous year. All cities in central and Eastern Europe are doing well, particularly Moscow.

In France, a weakening of uptake in Paris was balanced by greater uptake in the regions, especially in locations near main motorways. Indeed, according to CB Richard Ellis'' latest market review of France, uptake in the regions by October exceeded 2.1 million sq m - a 16 per cent rise from the year before with the majority, 1.7 million sq m, being in the regions.

Occupiers are particularly attracted to areas with a high density of logistics activity such as Nord and Rhone-Alps, which accounted for 50 per cent of uptake.

As a result of this activity, it is not surprising that overall availability in Goodman reports that the uptake of warehouse space across Europe in 2007 was higher than expected - some three million sq m in the main cities, which is up 17 per cent from the same period the previous year. East Europe is doing particularly wellFrance has fallen. Vacant supply in regional France stood at 1.2 million sq m in October. The CB Richard Ellis report points out that of all the speculative warehouses being built in the country, 81 per cent is being built in the provinces.

Uptake in Dutch cities also improved, although from a low base.

Meanwhile, uptake in German cities weakened but warehouse uptake is shifting further from the main cities to more remote locations alongside the main motorways with cheaper land prices.

The same applies to Holland, where warehouse uptake is increasingly concentrated in the southern regions around Venlo, Tilburg and Breda.

What does this mean for occupiers? Well, in general terms it means that vacancy of modern warehousing has remained limited. Availability of warehouse space tends to be for outdated properties.

Goodman reports that speculative construction in the warehouse sector has increased somewhat across the continent but this is not great news as there is not expected to be large-scale development due to the risks which only a few large players in the development market can bear.

However, rents across most European cities remained stable towards the end of 2007 with only two cities recoding rental growth in the survey - Bratislava and Madrid - while three cities, Brussels, Frankfurt and Hamburg, saw rents fall.

Knight Frank''s latest Market Monitor shows that the most expensive place to rent prime distribution units of more than 5,000 sq m is still London at €222 per sq m, with Paris cheapest at €55 per sq m.

Rents in Milan and Rome are still below €60 per sq m. Rents in Amsterdam, Brussels, Copenhagen, Frankfurt, and Munich remain below €80 per sq m while Eastern European cities such as Prague and Budapest come in at €60 sq m. Moscow is one of the most expensive cities at €130 per sq m.

Meanwhile King Sturge reports in its Baltic survey that the distribution warehouse market in the Baltic states is increasing dramatically every year, with a number of logistics parks over 100,000 sq m in the pipeline, supporting strong consumer spending and economic growth.

Prime rents have been more or less stable over the last two years, with the highest levels of €7.0/ sq m/month achieved in Estonia. Lithuania's market is the most competitive with the rents for modern premises ranging between €3.8 and €5.5/sq m/ month.

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