The international real estate advisor suggests logistics take up has remained resilient for the first three quarters of 2020, reaching 21.8m sq m, rising 10% above the equivalent level for this stage last year (Chart 2). The Netherlands (4.6 sq m, +56% yoy), Poland (3.7m sq m, +33% yoy) and the UK (3.5m sq m, +46% yoy) accounted for the majority of the increases.

It should be noted that 2020 already marks a record year of take up for the UK, exceeding the 3.5m sq m of take up achieved in 2016. Germany (5.1m sq m, +1% yoy) has remained the most dominant market this year.

Logistics demand in Iberia grew markedly on the previous year, as Spain (+7% yoy) and Portugal (+35% yoy) recorded resilient annualised growth, given rising ecommerce penetration rates.

Mike Barnes, Associate, European Research, Savills, commented: “Online sales which, for many retailers, were a primary route to trading during the first Covid lockdown, have unsurprisingly risen dramatically this year. Although for many places the peak was back in April, the Centre for Retail Research forecasts indicate that the ecommerce shift could accelerate by circa 12 months as a result of Covid-19, with an air of caution around physical shopping still in place before a vaccine roll-out.

“As a result of an uptick in ecommerce, we have seen take-up levels for logistics space increase dramatically over the last three quarters of the year. Consequently, vacancy rates (Chart 3) have held steady at an average of 5.3% across Europe at end Q3 2020. With supply currently looking limited, we anticipate rental growth to resume across the core mainland European markets from 2021, particularly given the structural undersupply of prime last mile facilities.”

Investor interest
European logistics investment transactions reached €22bn during the first three quarters of 2020, fractionally below the level recorded at the same time last year, although Savills anticipate to end 2020 in line with the five year annual average of €29bn (Chart 5).

Marcus de Minckwitz, Director, Regional Investment Advisory, EMEA, added: “2020 has been a remarkable year for the logistics market. The sector was already experiencing rapid structural change but Covid-19 has accelerated this significantly and the effects are going to be wide reaching. All the lead indicators point to increased demand for warehouse space going forward, particularly in urban locations, which has led to record levels of competition, be it between developers, occupiers and investors.”

In terms of specific markets, 2020 has been a remarkable year for Poland, with industrial investment volumes 368% above the five year average for the respective period, as investors look further east for more attractive yields. France has recorded YTD transaction levels 25% above the five year average.

De Minckwitz added: “As more capital has flooded into the sector, prices have risen and we expect this to continue through the course of the next two to three quarters. When you consider some of the lowest cost of capital currently active in the sector then there is a case to be made that prime yields could move below 3% for the very best assets in the core markets. And it’s not just the number of interested parties but also the amount of capital they have to invest. Portfolios are therefore trading particularly well, with premiums being paid from anywhere between 5% and 20%.

“As we move to the next phase of the pandemic, which may well be social recovery but widespread economic uncertainty and turmoil, then prices for logistics are likely to stabilise and different sub-sectors of the market will emerge. As we look back though this year has reset the dial for the sector in terms of its relative value within the real estate market, which the underlying fundamentals and growth trajectory wholly support.”