Catella Research: European logistics market 2024

More than ever, global developments are having a significant impact on the transport, traffic and logistics markets. On the surface, the tense geopolitical and economic environment (Ukraine war, Houthi attacks in the Gulf of Aden, volatility in inflation rates, interest rate turnaround, rise in freight rates) is reflected in global supply chains and therefore also in the European transaction markets. According to data from Real Capital Analytics (RCA), the transaction volume on the European market for the industrial asset class in 2023 was around 46% below the previous year's level.

In this environment, the logistics asset class, which has been spoilt by success in recent years, also felt the effects of the repricing last year. In a nutshell, this means that yields have risen again, as have the majority of rents. Does that fit together? Definitely yes, especially as investor and tenant demand for (new-build) space with high energy requirements in favoured locations in Europe remains very high. The first effects of "nearshoring" or "relocating" in Europe can also be measured.

There have been changes in yields and rents over the last 12 months. We would like to provide you with an up-to-date overview of the 1st quarter of 2024 and our expectations for the European logistics markets - as always in a comparative overview with a total of 115 regions:

• European prime rents currently average around €7.1/m² and range from €4/m² in Porto to €28.3/m² in London (Heathrow). Since our last market overview in March 2023, prime rents for logistics properties have risen by an average of around 21% across all 115 markets surveyed.
• The increase was particularly significant in Venlo (+73%), Edinburgh and Glasgow (around 64% each), Rotterdam (+69%) and Venray (+60%).
• Due to the new risk assessment on the European commercial property markets, the yield compression of recent years has come to an end. The European prime yield is currently 5.52% on average, which is 66 basis points higher than in the Q1 2023 analysis.
• The top German locations have a low yield level in an international comparison (4.30% - 4.60%). The lowest yields can be found in Switzerland (Zurich: 3.75% and Geneva: 3.6%). No location in Europe fell below the 3.5 % mark.
• The continued strong demand for logistics properties is reflected in the transaction volumes for 2023, with the transaction volume in Germany totalling around €5.9 billion last year. In the United Kingdom, the volume totalled around €11 billion.
• Overall, an investment volume of almost 29 billion euros was recorded across the markets analysed in 2023.

The European logistics market remains in a healthy state. On the one hand, the market for logistics properties will show clear push factors for a focus on traditional European logistics clusters in the coming months with reshoring, nearshoring and the effects of the wars in Ukraine and the Gulf of Aden. We therefore assume that the current strategic decisions of European industry will have a positive impact on the logistics property markets. A significant increase in the inventories of European industrial and manufacturing companies shows clear potential for future demand for logistics space. We therefore expect such a development to lead to further increases in rents on the corresponding rental markets for logistics space in the future. We are also observing growing investor interest in Eastern European markets/properties.

We are also registering an increasing relevance of ESG criteria in logistics properties, even if there is still a lack of a uniform and binding idea of what ESG actually means for the logistics property sector. Nevertheless, we measure clear price discrepancies between new-build and existing properties, which also reflect the different risk profiles and present good opportunities.

Enjoy analysing our Logistics Map Europe 2024

© Copyright Catella

Yours, Prof Dr Thomas Beyerle

About Catella Real Estate AG (CREAG)

Catella Real Estate AG (CREAG), founded in January 2007 and based in Munich, is engaged in the management of special property funds and property investment advice.

CREAG is a licensed capital management company (KVG) under German investment law (KAGB). The purpose of the company is the conceptualisation, development and management of open-ended real estate special funds that are aligned with the expertise and outstanding market position of the Catella Group. CREAG currently manages assets of €7.5 billion in 20 property funds (as at 30 September 2023).

Contact:
Prof. Dr Thomas Beyerle
Catella Real Estate AG
Alter Hof 5
80331 Munich
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