Enduring occupier demand & record low vacancy rates will underpin resilience of European industrial sector
€42bn invested into industrial & logistics assets so far in 2022, 50% above the five-year average. In Q3 2022 average prime yields rose to 4.26%, up 20bps since Q1 2022. Consumer spending to slow in 2023 but grow by 2.6% over the next two years.
According to Savills, investment into industrial assets in Europe has continued to reflect the strong performance of the sector’s occupational market. European investment volumes into industrial real estate assets totalled €42bn over the first three quarters of 2022, an increase of 2% YoY and 50% above the five-year average. Investment volumes in Portugal (595%), Belgium (124%) and Italy (93%) outperformed their five-year averages by the widest margins, however, in the Czech Republic, a lack of trading opportunities saw industrial investment volumes recorded in the first nine months of 2022 13% below the 5-year average.
In terms of outlook, Jana Čožíková, Industrial Agency at Savills Czech Republic and Slovakia, summarizes: “Across Europe, prime rents grew by 10.7% between Q3 2021 and Q3 2022. Neither a slowdown in leasing activity nor an increase in the number of tenants returning space as a result of a stronger-than-expected economic downturn will lead to an adjustment in rents. The long-term low availability of land and hence space is supporting continued rental growth. In particular, logistics companies, where transport and fuel expenses account for much higher proportion of total costs than those related to real estate, are primarily looking to reduce commuting distances and thus warehouses in prime locations and at prime rents remain in high demand.”
Lenka Pechová, Research at Savills Czech Republic and Slovakia, adds: “As industrial rents have continued to rise rapidly in the past months, even weeks, we have looked at where prime rates stand across CEE capitals in December 2022. Broadly, considering a standard warehouse of 5,000 sqm with office and sanitary space, and harmonising service charge components Prague has by far the most expensive total occupancy cost and moreover, there are hardly any immediately vacant premises on offer.”
