Compared to the previous year, investments in logistics real estate across Europe doubled in 2006, amounting to over 19 billion euros. It is projected that investments in 2007 will be higher, exceeding 20 billion euros. Meanwhile, the growth in rental income from warehouse space in 2007 is estimated at below 1% among the old European Union countries (EU15), partly due to a decline in rental rates in 2006.
According to analysts, tenants and developers of logistics real estate will expand their operations into Central and Eastern European markets, particularly the new European Union markets of Romania and Bulgaria. Demand from tenants for warehouses in Western Ukraine and Russia is expected to emerge. However, according to the report, Poland has the best prospects in Central Europe for the next five years. The logistics market in Poland will develop beyond Warsaw along new planned motorways in the regions of Łódź, Piotrków Trybunalski, Poznań, Wrocław, and the Tri-City.
– The climate for investment in the logistics real estate sector is very good. Since the beginning of 2007, Poland has been experiencing a rapid increase in activity in industrial production and retail trade. Strategic location will be our main advantage compared to other Central European markets – comments Rafał Bochenek, Country Manager for Goodman in Poland. – Already at the beginning of 2007, the vacancy rate decreased, falling to 6.5% in Warsaw and to 13% outside the capital area. An increase in warehouse space leasing was recorded in Warsaw, which amounted to 6.3% in the first quarter of 2007. The capitals of other Central European countries: Bratislava, Budapest, and Prague recorded a decline during this period. The supply of new Class A warehouse space in Poland will certainly reach over 1 million square meters in 2007, and there is no indication that it will not remain at the same or a higher level in the next 2-3 years.
The Goodman report shows that the best prospects over the next five years among EU15 countries will be seen in the Netherlands, Ireland, Finland, and Spain, with a total return of nearly 9% per annum. Austria, Greece, and Luxembourg are expected to perform the weakest, with total returns not exceeding 6% per annum.
Due to competition from north-western Poland and Slovakia, and to a lesser extent from Eastern European countries, it is predicted that the weakest performing logistics markets among cities over the next 3 years will be Berlin, Prague, and Vienna. Their situation will only begin to return to normal in 2009.
The authors of the report forecast that with the growing shortage of sites for major logistics investments in Europe, developers will increasingly focus on building larger, modern warehouses in more peripheral locations.
Report in English in PDF format.