European Industrial & Logistics Sector Outlook 2024

RENTAL GROWTH CONTINUES

BUT STARTING SLOW

EUROPEAN LOGISTICS & INDUSTRIAL PRIME HEADLINE RENTS (AVERAGE GROWTH RATES BY COUNTRY; REBASED TO Q3 2018 = 100)

160

Prime logistics rents have grown at extraordinary levels over the past few years, and extended into 2023 in certain markets. Over the last five years, prime logistics rents have grown by an average of 37% across Europe, with growth in some markets surpassing 80% However, after such remarkable growth in a high-demand, supply-constrained environment, the pace of rental growth is slowing. In the year leading up to Q3 2023 , the average rate of rental growth across European markets was 11%, compared to 15% in Q4 2022 (although, in some countries, rental growth has continued to accelerate). A more nuanced narrative is now unfolding. Instead of all markets within a country following a similar growth trajectory, local market dynamics, especially the supply-demand profile for different types and sizes of real estate, as well as the degree of involvement by developers and landlords, are exerting more influence. Consequently, the profile of rental growth may vary among different markets within the same country.

Nevertheless, rental growth is expected to remain positive across European markets . Landlords are eager to ensure that headline rents continue to ascend, creating a basis for new lease and rent review negotiations at much higher rental levels than previously contracted. However, tenant incentives are becoming more common in lease negotiations, as landlords seek to secure income amid a slowdown in occupier demand. This trend may begin to affect headline rental growth. Landlords are also being more creative in crafting tenant incentive packages, sometimes including amortised fit-out costs alongside more traditional rent-free periods.

150

140

130

Chart 3: European logistics & industrial prime headline rents

120

110

100

90

SEP 2018

NOV 2018

JAN 2019

MAR 2019

MAY 2019

JUL 2019

SEP 2019

NOV 2019

JAN 2020

MAR 2020

MAY 2020

JUL 2020

SEP 2020

NOV 2020

JAN 2021

MAR 2021

MAY 2021

JUL 2021

SEP 2021

NOV 2021

JAN 2022

MAR 2022

MAY 2022

JUL 2022

SEP 2022

NOV 2022

JAN 2023

MAR 2023

MAY 2023

JUL 2023

SEP 2023

FRANCE SPAIN

GERMANY SWEDEN

UNITED KINGDOM NETHERLANDS

ITALY

POLAND

EUROPE AVERAGE

Source: Cushman & Wakefield Research

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Prime logistics rents have grown by an average of 37% across Europe, with growth

in some markets surpassing 80%.

10 LOGISTICS & INDUSTRIAL OUTLOOK 2024

THE TIDE IS TURNING SWIFTER | 11