february european logistics market 2021 2020 set a …

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Classification : Internal1

R E S E A R C H

EUROPEAN LOGISTICS MARKET

LOGISTICS TAKE-UP FOR WAREHOUSES OVER

5,000 SQM

INDUSTRIAL & LOGISTICS INVESTMENT IN EUROPE

FEBRUARY2021 2020 SET A NEW RECORD VOLUME OF TRANSACTIONS IN

EUROPE, BOOSTED BY ONLINE SALES

TAKE-UP

INVESTMENT

• Take-up in 2020 increased by 14% in the 6leading countries despite lockdown measuresthroughout the year.

• Supply is low with vacancy rates at 5.5% orless in most European countries. It iscompletely unlike the post global financialcrisis in 2010 when levels of supply were high.Today the risks of oversupply are limited.

• Rents are expected to continue to increaseslightly just above inflation. The combination ofsustained demand and low supply will maintainsome pressure on rents especially in primesectors.

• Prime yields compressed during Q4 2020 to3.35% in Germany, 3.5% in the UK, 3.8% in theNetherlands and 3.9% in France.

• Further yield compression can be foreseen forprime assets as the gap with long-termgovernment yields is still significant, over 400bps on average in Europe.

• Going forward we will see increaseddivergence in the performance of differentlogistics segments as the yield gap betweenCore and non-Core asset will widen.

Occupier Market fundamentals arehealthy with low supply, robust demandand some restructuring of the supplychain because of Covid-19. Marketactivity is forecast to increase in 2021reflecting both an economic reboundand a strong potential of growth in theecommerce sector.

Industrial and logistics investment hasbeen more resistant (-2% in 2020) thanother asset classes.

During lockdown in Q2 2020, yielddecompression was anticipated acrossEurope. It did not happen and insteadthe resilience of the logistics market,compared to other asset classes,resulted in a compression of yields inalmost all European countries.

+14%

-2%

Vincent RobionHead of Research - Logistics Europe

February 2021 PROPERTY REPORT

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SCIENCE BEHIND THE RECOVERY – A DOSE OF OPTIMISM WITH AN INJECTION OF REALISM

GDP and Employment growth in the Eurozone

GDP growth (year-on-year change)

Manufacturing output(year-on-year change)

Retail sales(year-on-year change)

2021 did not start as many would havehoped for. The short-term prospectsfor many economies havedeteriorated, as once again the rates ofinfections rise, causing new lockdowns.If widespread vaccination programmesare the answer to unlocking Europeaneconomies, then we need to berealistic. Recent changes to themanufacture of vaccines have led todelays, meaning we are unlikely toinoculate as extensively across Europein the first half of the year as had beenaspired to.

The reintroduction of restrictions willmean Eurozone growth in Q1 2021 willbe much weaker than expected.Economic growth in the Eurozone as awhole will contract in the first quarter,which means there is no avoiding arecession. We are likely to seecontraction in growth for the UK andGermany, pushing both back into atechnical recession. France and Italyare exceptions in avoiding double-diprecessions.

All forecasts point to a rebound in2021, albeit delayed from whenoriginally predicted. Growth willresume in the second half of the yearfor most. We anticipate that theEurozone as a whole will registergrowth of 5.6% in 2021, with the UKgrowing at 6.4%, France at 6.3% andGermany at 4.2%.

The manufacturing sector is now lessaffected as the measures are mostlyimpacting the service sector. Therestill are reasons to be hopeful aboutthe economy in 2021 as monetary and

fiscal policies should continue tosupport activity, and we expectinvestment and spending to grow at afast pace.

Unemployment expectations will be akey indicator of the rebound. In theshort term, this may act as a drag onspending and should boostprecautionary savings.

The analysis of the economicconsequences of Covid-19predominantly focuses on the nearterm. Yet there will also be profoundlonger-term consequences includinghigher debt burdens for governmentsand many companies. There is the riskthat many people who have lost theirjobs or are in furlough schemes willremain unemployed for a considerabletime.

The changes in behaviour observedwith the pandemic may also becomepermanent. For example, onlineshopping, working from home, videoconferencing may each have asignificant impact on retail activities,office sector and business travel.

The risks to the 2021 outlook arebroadly balanced, with recoverylargely dependent on the successfulrollout of vaccines. However,premature retrenchment of policysupport is a risk. It could have adetrimental impact on households andbusinesses, with the knock-on effect onunemployment levels possiblyderailing the recovery.

GDP GROWTHEUROZONE - 2020

-7.3%

Source: Oxford Economics, BNP Paribas

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

05 07 09 11 13 15 17 19 21(f)

GDP Employment

-15%

-10%

-5%

0%

5%

10%

05 07 09 11 13 15 17 19 21(f)

UKGermanyFrance

-20%-15%-10%

-5%0%5%

10%15%20%

05 07 09 11 13 15 17 19 21(f)

UKGermanyFranceSpain

-15%-12%

-9%-6%-3%0%3%6%9%

12%15%

05 07 09 11 13 15 17 19 21(f)

UKGermanyFrance


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Take-up in Germany remained high in2020 (-2%) despite the disruptions dueto the pandemic. E-commerce was asubstantial market driver throughoutthe year. Overall, the market continuedto be dynamic, as many companieshave been shifting to smaller locationsoutside the traditional hubs, wherethere is still sufficient supply. Rentsincreased slightly during 2020 inFrankfurt, Cologne, Düsseldorf andLeipzig because of limited supply, andtransactions signed in speculativedevelopments at well-located logisticsparks.

2020 set a record year in the UK, take-up increased by 70%. Occupier demandsurged as Covid-19 accelerated theshift to e-commerce and put thespotlight on supply chains. Onlineretail represented nearly 40% of take-up, with Amazon alone taking over 1million sqm this year. With nearly 2million sqm taken up in 2020,Birmingham/Midlands was the singlelargest submarket in Europe. Primerents increased in the main marketsreflecting positive absorption dynamicsand limited availability of grade Awarehouses.

In France, the occupier market (-8%)was affected by the crisis. Nearly 40%of take-up was signed during Q4 andservice providers accounted for nearly50% of total take-up in 2020. Supplycontinued to be scarce in mostmarkets. As the vacancy rate stayed

low in France (around 4%), competitionbetween occupiers for high qualitybuildings remained evident, implyingsome prospects for rental increases inprime locations.

The Dutch market achieved a recordvolume of transactions (+8%) in 2020,just below the 3 million sqm threshold.Activity was driven by demand fromretail and distribution, whichaccounted for nearly half of total take-up. Significant demand increases overthe past 3 years meant supply hasdried up, especially for good qualitywarehouses. Demand for newdevelopments stayed robust puttingmore pressure on market prices.

In Spain, take-up increased by 14%despite strong lockdown measures. InMadrid, the market remained healthyboosted by large transactions. InBarcelona, the market droppedsharply, constrained by a lack ofsupply. Vacancy rates were still verylow in Barcelona (3.3%) whilst itincreased to 7.4% in Madrid and 5.4%in Valencia.

Logistics in Poland was one ofEurope’s most dynamic markets as itreached a record volume oftransactions at 3.6 million sqm in 2020(+27%). Demand was vigorous in allmajor sectors including e-commerce,3Pls and manufacturers. Prime rentsstayed stable in most markets, rangingfrom €41 and €44 in the main logisticshubs.

2020 SET A NEW RECORD VOLUME OF TRANSACTIONS IN EUROPE, BOOSTED BY ONLINE SALES

2020 set a new record volume oftransactions in Europe, boosted byonline sales

Take-up increased by 14% in the 6main European countries despite strictcontainment measures throughout theyear. Against all odds, following recordvolumes of transactions for 3 years in arow stimulated by a strong demand forowner-occupier developments, 2020set a new record for the warehousingreal estate market.

E-commerce, more than ever, is thekey driver of the logistics marketbenefiting from sharp growth acrossEurope: 2020 is likely to see +13%increase when final data is published.COVID-19 accelerated the shift to e-commerce and put the spotlight onsupply chains. Changes in consumerbehaviour will help increase thepenetration of e-commerce in marketswhere this has been limited so far,further boosting demand for logisticsspace.

Retailers and 3PLs (acting mainly forfood distributors) support robustdemand as each absorbed around 40%of the market. 3PLs also act for e-commerce retailers so account forsome of the demand from that sectortoo.

Supply drying up over the past twoyears while demand stayed sharpmeans there is a major imbalance insome markets. This was particularlyevident in prime locations wheredemand shifted towards other regionallocations. While some premises arebound to be released back on themarket, there is no major risk ofoversupply.

Following two years of substantialgrowth, prime rents increased by 1.9%in 2020, caught between economicslowdown on the one hand, low supplyand firm demand on the other.Currently the impact on rents fromCovid disruption is negligible.

VACANCY RATE(2020)

±5.5%TAKE-UP

(2020 vs 2019)

+14%

0500

1,0001,5002,0002,500

2019 2020

000 m² Take-up –Warehouses over 5,000 sqm


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Classification : Internal

PRIME HEADLINE RENTS – WAREHOUSES OVER 5,000 M²

Prime headline rents

≥ €90

€70-90

€50-70

< €50

Rents in €/sqm/year

European average

Q4 2020 vs Q4 2019

+1.9%

50 markets, 23 countries

20406080

100120140160180200

€/m²/year

Prime rent - Q4 2020 Range since 2010

57

PARIS

113

DUBLIN

179

LONDON

120HELSINKI121

OSLO

94

COPENHAGEN89

MANCHESTER

88

STOCKHOLM

89B’GHAM

76

HAMBURG86

BERLIN84

FRANKFURT 84

MUNICH

75

MADRID

84

BARCELONA

59PRAGUE

52

ATHENS

58

BRUSSELS

52

VENLO

50

LYON56

MILAN

57

ROME

54

VALENCIA

47

MARSEILLE

47

BUCHAREST

43

WARSAW II41

POZNAN

45

LISBON

42

KATOWICE

82

VIENNA

59BRATISLAVA

58

BUDAPEST

60

TALLINN54

RIGA58

VILNIUS

1 GBP = EUR 1.10711 SEK = EUR 0.09741 NOK = EUR 0.09301 DKK = EUR 0.1343


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The sector is gaining market shareover other asset classes, accountingfor 17% of total commercial real estate.Investment share doubled in 10 yearsto settle around the €40 bn thresholdfor the 4th year in a row.

Prime yields decreased on average by25bps in Europe to reached historiclow levels in Q4 2020. There are nosigns of decompression in theimmediate future. Instead, prime yieldsare likely to compress further due tostrong demand and the scarcity ofproducts in prime locations.

Going forward we will see increaseddivergence in the performance ofdifferent logistics segments, and,depending on the risk profile of theinvestor, the yield gap will widen.

Repricing will depend more on howmarginal the fundamentals are:location, state of the building andprevailing rental conditions.

The yield spread between offices andlogistics is still attractive, whilst thefundamentals for logistics continue tobe favourable compared to othermainstream asset classes. In thecurrent poor economic environment,investing in a sector where theprincipal structural demand driver, e-commerce, is growing by double digitsper year is very compelling.

In the UK, industrial and logisticsinvestment was robust in 2020compared to pre-crisis levels. Investorshave been rebalancing their allocation

strategies towards industrial andlogistics, resulting in highlycompetitive bidding for prime longleased assets. Prime yields compressedfurther during Q4 at 3.5%.

In Germany, logistics investmentmarket gained market shares againstother assets in 2020 and continued tothrive despite the crisis and thescarcity of products in the major hubs.Prime yields decreased to 3.35% (-35bps during 2020) and there are nosigns of decompression. This was thelowest yield recorded in Europe.

The market was dynamic in Franceboosted by outstanding levels ofinvestment during Q1. It was clearly ata standstill during lockdown, beforereturning to high levels in Q4. Investorappetite remained clear despite theeconomic crisis and investmentvolumes reached the levels recorded in2017-2018. The prime yield decreasedto 3.9% in Q4 and further compressionis already anticipated in 2021.

In the Netherlands, the volumesachieved in 2020 were just above the5-year average. The market is boomingbut products available to buy arescarce. The prime yield dropped to ahistoric 3.8% in the Netherlands duringQ4 with no signs of decompressionahead.

In Spain, the perception of investorsabout logistics clearly indicates theythink it represents a safe, stable andattractive asset. The market reached

its second highest volume everrecorded in 2020 and the prime yielddropped to 4.7%. It will furthercompress in the next few quarters.

In Poland, Industrial and logisticsinvestment increased sharply. Themarket benefits from strong driversincluding low labour costs and thestrategic positions of units, especiallyalong the German border. Yields forprime multi-tenant and logisticsschemes dropped to 5.25% in Q4.

INDUSTRIAL & LOGISTICS INVESTMENT PROVED VIGOROUS COMPARED TO OTHER ASSET TYPES REACHING €38 BN IN 2020

Investment volume (€ billion)

Share of Logistics in Commercial Real Estate

17%Investment volume

(2020 vs 2019)

-2%

41%

17%

17%

4%

21% OfficeRetailIndustrialHotelOther

02468

10

2020 2010-2020 average

€ billion

0400800

1,2001,6002,000

2020 2010-2020 average

€ million

0

5

10

15

20

07 08 09 10 11 12 13 14 15 16 17 18 19 20

Industrial & logistics investment Average 2007-2020

€ billion


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NET PRIME YIELDS – WAREHOUSES OVER 5,000 M²

Net prime yields

≤ 4.5%

4.5%-6%

> 6%

European average

Q4 2020 vs Q4 2019-25 bps

3%4%5%6%7%8%9%

10%11%12%

Q4 2020 Q4 2019 Range 2007-2020

3.9

PARIS

5.1

DUBLIN

3.5

LONDON

4.25HELSINKI4.5

OSLO

5.25

COPENHAGEN3.75

MANCHESTER

4.6

STOCKHOLM

3.75B’GHAM

3.35

HAMBURG3.35

BERLIN3.35

FRANKFURT 3.35

MUNICH

4.7

MADRID

4.7

BARCELONA

7.25

TALLINN

7.25

RIGA7.25

VILNIUS

5.0PRAGUE

7.7

ATHENS

4.9

BRUSSELS

4.15

VENLO

3.9

LYON5.0

MILAN

5.25

ROME

6.0

VALENCIA

3.9

MARSEILLE

8.0

BUCHAREST

5.25

WARSAW II6.25

POZNAN

6.25

LISBON

6.25

KATOWICE

4.5

VIENNA

6.35BRATISLAVA

7.25

BUDAPEST

4.25

JONKOPING


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O c c u p i e r l o g i s t i c s m a r k e t – W a r e h o u s e s o v e r 5 , 0 0 0 s q m

C o m m e r c i a l r e a l e s t a t e i n v e s t m e n t m a r k e t

CityTake-up (000 sqm) Rents (€/sqm/yr)

2020 2029 Variationy-o-y (%) Q4 2020 Q4 2019

Birmingham 1,930 1,400 38% 89 89Leeds 1,140 320 256% 83 72Greater Paris 940 1,010 -7% 57 57Madrid 890 460 93% 75 74London & South East 690 600 15% 179 173Marseille 550 200 175% 47 45Lyon 540 280 93% 50 50Manchester 530 260 104% 89 86Rotterdam 420 300 40% 68 68West-Brabant 370 280 32% 54 54Bristol 360 70 414% 104 92Hamburg 350 210 67% 76 76Barcelona 340 520 -35% 84 84Lille 330 620 -47% 46 46Frankfurt 310 300 3% 84 79Berlin 220 270 -19% 86 86Venlo-Venray-Eindhoven 180 360 -50% 52 52Amsterdam 180 200 -10% 65 65Prague 180 260 -31% 59 58Cologne 180 90 100% 67 65Munich 130 340 -62% 84 84Düsseldorf 100 100 0% 73 69Total 22 Markets 10,860 8,450 29%

Country

Commercial real estate investment € million

Industrial & logistics investment € million

2020 2029 Variationy-o-y (%) 2020 2029 Variation

y-o-y (%)

United Kingdom 46,970 58,850 -20% 9,450 8,530 11%Germany 59,730 73,440 -19% 7,940 7,530 5%France 28,200 43,360 -35% 4,150 6,280 -34%Netherlands 10,400 15,760 -34% 3,270 4,580 -29%Sweden 11,820 13,810 -14% 3,060 3,170 -3%Poland 4,990 7,650 -35% 2,350 1,110 112%Italy 8,770 12,190 -28% 1,510 1,430 6%Spain 7,660 10,730 -29% 1,490 1,850 -19%Norway 10,390 9,300 12% 910 910 0%Belgium 5,480 4,230 30% 640 210 naFinland 4,350 4,670 -7% 410 440 -7%Austria 1,990 4,300 -54% 270 450 -40%Ireland 1,760 4,750 -63% 270 290 -7%Czech Republic 1,370 3,120 -56% 190 370 -49%Portugal 2,650 3,040 -13% 130 70 naRomania 880 710 24% 70 120 -42%Other European countries 15,010 19,340 -22% 1,990 1,660 20%Total Europe 222,420 289,250 -23% 38,100 39,000 -2%


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N e t p r i m e y i e l d s – W a r e h o u s e s o v e r 5 , 0 0 0 s q m

CountryNet prime yield

Q4 2020 Q4 2019 Variationy-o-y (bps)

Austria 4.50% 5.40% -90 bpsBelgium 4.90% 5.25% -35 bpsCzech Republic 5.00% 5.00% 0 bpsDenmark 5.25% 5.25% 0 bpsEstonia 7.25% 7.50% -25 bpsFinland 4.25% 5.00% -75 bpsFrance 3.90% 4.00% -10 bpsGermany 3.35% 3.70% -35 bpsGreece 9.50% 8.50% 100 bpsHungary 7.25% 7.00% 25 bpsIreland 5.10% 5.10% 0 bpsItaly 5.00% 5.25% -25 bpsLatvia 7.25% 7.75% -50 bpsLithuania 7.25% 7.50% -25 bpsNetherlands 3.80% 4.30% -50 bpsNorway 4.50% 4.75% -25 bpsPoland 5.25% 5.75% -50 bpsPortugal 6.25% 6.25% 0 bpsRomania 8.00% 8.00% 0 bpsSlovakia 6.15% 6.35% -20 bpsSpain 4.70% 4.90% -20 bpsSweden 4.25% 4.25% 0 bpsUnited Kingdom 3.50% 4.00% -50 bps


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DEFINITIONSLETTING & SALESTake-up: represents the total floorspace known to have been let or pre-let, sold or pre-sold to tenants orowner-occupiers during the surveyperiod. It does not include space that isunder offer.

• A property is deemed to be “takenup” only when contracts are signedor a binding agreement exists.

• Pre-let refers to take-up that waseither in the planning orconstruction stage.

• All deals (including pre-lets) arerecorded in the period in whichthey are signed.

• Contract renewals are not included

• Sales and leasebacks are notincluded as there had been nochange in occupation.

• Quoted take-up volumes are notdefinitive and are consequentlysubject to change.

New space: premises that have neverbeen occupied in new buildings.

Second hand space: premises thathave been previously occupied by anoccupier or vacant for more than fiveyears.

Vacant space: all completed buildingsactively seeking rental or sale tooccupiers.

New supply: all building restructuringthat adds to the existing stock. Theseare analysed according to progress.

• Completed new supply: buildingson which construction work isfinished.

• Under construction: buildings onwhich construction has effectivelybegun. Prior demolition work is nottaken into account.

• Planning permission granted:authorisation to build obtained,generally booked after settlementof third party claims.

• Planning permission submitted:planning permission requested,being processed.

• Projects: identified intention of abuilding operation for which norequest has been filed.

Speculative / Non speculativedevelopments:

• Speculative: construction launchedwithout prior rental or sale to theoccupier.

• Non-speculative: constructionlaunched after partial or completesale or rental to an occupier.

Rent: common annual headline rent,expressed per square metre per year,and excluding taxes and charges.

• Average rent: weighted average ofrented area. The average featuredis a moving average over threequarters, to smooth out thechanges.

• Prime rent: represents the topopen-market rent at the surveydate for a real estate unit andshould be representative at around3 to 5% of the market volume(sqm):

- of standard size commensuratewith demand in each location.

- of the highest quality andspecification.

- best location in a market.

INVESTMENTInitial net prime yield: ratio betweennet income (excl. operating costs) overthe purchase price including allacquisition costs.

Prime Yield: net lowest yield obtainedfor the acquisition of a unit:

- of standard size commensuratewith demand in each location.

- of the highest quality andspecification.

- in the best location in eachmarket.

Portfolio: group of several assetslocated in different places.

ASSET TYPES & LOGISTICSWarehouses: buildings intended forstorage, distribution or packaging.

• Distribution centres: national orregional used for storage located inthe outskirts of cities with goodtransport connections.

• Fulfilment centres: allowadditional activities, oftenautomation driven. Typically largerthan standard logistics to allow

other activities than storage.

• Cross-dock: Little storage time.Properties used to unload goodsand reassemble / move themdirectly for outbound distribution.

• Last mile: for city distribution.Includes a wide range ofwarehouses and storage unitsincluding older space.

• Cold storage: Storage for fresh orfrozen products, with thermalinsulation and specific equipmentas part of the warehouse. Involveshigher construction costs.

Logistics: the process of planning,implementing, and controllingprocedures for the efficient andeffective transportation and storage ofgoods, and related information fromthe point of origin to the point ofconsumption. Includes inbound,outbound, internal, and externalmovements.

Supply chain: all the elements in theprocess of supplying a product to acustomer. The chain begins with thesourcing of raw materials and endswith the delivery of finishedmerchandise to the end-user. Itembraces vendors, manufacturingfacilities, logistics service providers,distribution centres, distributors,wholesalers, other intermediaries, etc.

Supply chain management:Encompasses the planning andmanagement of all activities involvedin sourcing and procurement,conversion, and all logisticsmanagement activities.

BNP Paribas Real Estate Disclaimer clause BNP Paribas Real Estate cannot be held responsible if, despite its best efforts, the information contained in the present report turns out to be inaccurate or incomplete. This report is released by BNP Paribas Real Estate and the information in it is dedicated to the exclusive use of its clients. The report and the information contained in it may not be copied or reproduced without prior permission from BNP Paribas Real Estate. Should you no longer wish to receive this report, or wish to modify the conditions of reception of this report, please send an e-mail to: [email protected]


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february european logistics market 2021 2020 set a …

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