Competition for logistics space in Europe is heating up, with record take-up levels (11.9 million sq m) and downward pressure on yields reported across the continent in the first half of 2019, according to the latest European logistics report from the international real estate advisor.
Savills data shows that rising levels of e-commerce has helped to create unprecedented levels of demand from logistics occupiers across Europe. The Czech Republic’s take up of logistics space reached 722,000 sq m in the first half of 2019, 13% above the H1 five-year average. Rents currently remain unchanged at 58 euros per sq m and year in Prague, but with the national vacancy at only 4%, this could apply upward pressure on rents.
Jaroslav Kaizr, Head of Industrial Agency, Czech & Slovak Republics, says: “Looking at yields across Europe, the Czech market has become very competitive in attracting foreign investment into the industrial sector. Low vacancy has been pushing rents up and this is helping to open up new, more difficult locations such as brownfields where urban logistics are well suited.”
In terms of investment, European logistics saw €12.2 billion invested during H1 2019, 5% below the previous five-year H1 average, as weaker conditions in the UK and Germany (-19% and -18% respectively) offset stronger performances in markets like the Czech Republic (+80%) and Poland (+83%) that significantly exceeded their five-year investment volume averages.
Strong investment volumes in recent years have resulted in yield compression for larger markets. Savills recorded that average European prime logistics yields compressed 20 basis points (bps) from 4.9% to 4.7% during H1 2019, with significant yield compression seen in Prague (-150bps), Stockholm (-30bps) and Madrid (-25bps).