European Logistics Market Update Q2 2024
Find our analysis of sector trends and how they impact demand, supply, rental growth, yields, and investment activity in our latest market update.
- Lisa Graham
- Alexandra Tornow
- Raphaele Naud
JLL’s latest market update highlights what’s driving a rebound in capital markets while providing an update on occupational market dynamics.
Investment activity rose by 9% YoY in H1 2024, as improving investor confidence is moving sidelined capital targeting the European industrial and logistics sector into action.
Meanwhile, although H1 take-up of nearly 11.4 million sqm decreased by 7% YoY, the rate of decline is slowing.
Despite occupational challenges, Q2 leasing activity was up 12% QoQ and 14% above the 2015-2019 average. At the same time, construction activity slowed by 20% YoY. For this reason, a higher European weighted average vacancy rate that rose for the sixth consecutive quarter to 4.8%, is viewed as temporary. The expected return of all occupier segments should normalize vacancy levels by 2025 and beyond. This is why we support continued upward pressure on prime rents across the region.
Over € 7.1 billion was invested in European industrial and logistics assets during Q2 2024, pushing the H1 total to € 13.4 billion. Stable yields, falling inflation, and June’s rate cuts have created the right conditions for investors to move sidelined capital into action. Especially encouraging was the return of select larger deals, including portfolios, and very recently, core investors in smaller transactions (€50-€70 million).
Top 3 Trends to look out for in H2 2024:
- Strengthening investment flows targeting a broader range of investments (core, core+, and value-add).
- Retrofitting and brownfield redevelopment. As leasing markets gradually improve leading up to 2025 and the available supply of “best-in-class” assets continues to shrink, the obstacles to develop new space on greenfield space will start to redirect developers and occupiers to retrofitting older buildings or redeveloping in prime locations and optimizing these sites.
- Continued prime rental growth: Despite a slower pace of growth, improving occupier markets coupled with limited stock of modern space will keep pressure on prime rents. In markets with higher vacancy levels, non-prime rents will underperform prime.
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