Research

European Logistics Market Update Q1 2024

In our latest analysis of the industrial and logistics market, we examine occupier demand, rental performance, investment market and yields across Europe

May 14, 2024

Contributors:

Lisa Graham
Alexandra Tornow
Raphaele Naud

JLL’s latest market update reviews what behind slower occupational markets in Q1 2024 , while highlighting the sooner-than-expected pick up in investment activity.

Take-up of over 5.2 million sqm across Europe in Q1 2024 declined by 19% YoY. Demand levels have returned to pre-pandemic levels following 2021-2022 records. Meanwhile, investment activity rose by 14% YoY in Q1 2024, encouraged by improving confidence and commitment to Europe’s industrial and logistics sector.

Despite a continued slowdown in leasing activity, Q1 take up was 5% above the 2014-2019 average. Supply constraints, longer negotiation periods, and for 3PLs, cost conscious end customers are slowing the normal flow of lease deals. The European weighted average vacancy rate rose for the fifth consecutive quarter to 4.5%.

Over € 6.6 billion was invested in European industrial and logistics assets during Q1 2024. Activity returned to robust pre-pandemic levels. Especially encouraging was the marked return of larger deals, including portfolios. Improving price clarity, falling inflation, and rate cuts expected sooner rather than later is adding to improving investor confidence.

Top 3 Trends to look out for in H1 2024:

Leasing markets: Not much improvement expected during the first half of 2024. Most activity will come from 3PLs and manufacturers (i.e. new manufacturing subsectors), though the former is grappling with a lot of grey space (space for sublease or lease reassignment). E-retailer inquiries are increasing, but commitments are still few and far between. Look to the second half of the year for this occupier segment to pick up pace in leasing markets.
Supply: Construction starts, and the development pipeline continue to shrink. Intensifying regulation, higher construction costs, more selective financing, and weaker demand have added to developer cautiousness. Speculative development continues to decline except for some markets where developable land is still available.
Rents: JLL’s weighted European average prime rental growth softened further to 6.6% YoY, down from 8.1% YoY in 2023, 16.8% YoY in 2022.

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