Occupational Demand Investment Outlook COVID-19 - Assoimmobiliare
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European Commercial – Summer 2020
S P OT L I G H T
European Logistics
Savills Research
Outlook
Occupational Demand Investment Outlook COVID-19
European Logistics Outlook Summer 2020
COVID-19 impact to speed up
ecommerce growth by one year
Economic Overview wave have since reduced public or have already begun to re-shore
As Europe starts to think about transport usage from the June/ or nearshore some operations.
how it is going to drag itself out of July post COVID-19 peaks,
the deepest economic downturn noticeably in Paris and Madrid. It has to be said that we are
ever recorded, consumers are still only dealing with the initial
trying to take stock of their own Throughout the crisis the shock of the crisis - as we move
financial positions and brace logistics sector has provided some into the recovery and rebuilding
themselves for the inevitable respite and it has become an even phases then companies will have
short-term pain that lies ahead. more vital part of people’s lives. a chance for reflection and longer
Perhaps most significant to this Many workers have taken on term decisions can be made as
will be the removal of furlough temporary positions in fulfilment stability returns. Increases in
schemes, that have provided and distribution centres, to help online spending have always
vital support through the crisis in the response to the pandemic meant increased demand for
but are also in danger of having accelerating the demand for warehouse space but the big
created a cliff-edge moment for ecommerce. We are also observing question for stakeholders in the
the economy. French and German more anecdotal evidence of short logistics market will be what the
furlough schemes have been term employment in the delivery longer-term, stable outlook will
extended into 2021, although UK, sector, for example French light be for consumer spending as a
Italian and Spanish schemes are commercial vehicles (LCVs) whole, and online spending within
on course to terminate this year. registrations have increased by this. Noting at the same time that
8% yoy in June, in order to meet it is the key driver for the market
Economic growth forecasts the rising demand for last mile but risks in other areas such as
continue to fluctuate around delivery. manufacturing and production
the number of new outbreaks, will also have a significant baring.
although Focus Economics’ One challenge for the European
August forecasts indicate logistics market is the stagnating COVID-19 impact to speed up
Eurozone real GDP will fall by levels of continental and global European online retail sales by
8.2% during 2020 with a 5.5% trade. Intra- EU trade growth was one year
increase in 2021. The level of relatively flat during 2019, and Retail sales volatility has
uncertainty is very high though the World Trade Organisation reached record levels with
and a second wave and further (WTO) estimate global trade to online retail sales accounting
lockdowns will quickly alter the fall between 13% and 32% during for unprecedented levels of total
path of any recovery. 2020. Although lower oil import retail sales, spiking to as high as
prices have provided some respite 33% in the UK during lockdown
For example, Apple’s transit for European manufacturers, period.
mobility data indicates a gradual companies are ultimately
return to public transport usage reviewing their supply chains The Centre for Retail
as consumers begin to feel more and looking to nearshore some Research’s (CRR) July 2020
confident about the pandemic and operations in order to mitigate forecast Western Europe’s six
government incentive schemes risk. According to the Institute for largest economies’ online retail
encourage people back to physical Supply Management’s (ISM) July sales as a percentage of total sales
retail, although fears of a second survey, 20% of firms are planning will rise from 12% in 2019, to 16.2%
Increases in online spending have always meant increased demand for warehouse space
but the big question for stakeholders in the logistics market will be what the longer-term,
stable outlook will be for consumer spending as a whole, and online spending within this,
Marcus De Minckwitz, Regional Investment Advisory.
savills.com/research 2European Logistics Outlook Summer 2020
in 2020, before easing back to 15.3% during Consumer confidence will play a huge
2021 (Chart 1), reflecting a normalisation part in determining retail footfall and online
of consumer patterns as shops reopen and expenditure into 2021, particularly around
consumers return to the high streets. the grocery sector. Mintel estimate that the Western European
UK’s online grocery sales will grow by 33% online retail
Spain and Italy are expected to see the yoy in 2020, as Amazon Fresh have provided penetration rate is
most significant impact given that pre- free grocery delivery service to Londoners forecast to
Covid they had relatively low online sales for Prime members. Dutch online normalise at 15.3%
proportion, which are expected to increase supermarket, Picnic, has expanded into by 2021.
to close to the 10.7% tipping point where Germany and is developing an automated
Savills observed a marked increase in distribution centre after attracting €250m
logistics demand within the UK. of financing in 2019. LIDL and Holland Food
Group have also signed for 48,000 sq m and
Prior to COVID, the Western European 30,000 sq m respectively so far this year in
average online retail sales penetration was the Netherlands.
forecast to reach 15.3% by 2022. However, 20% of firms have
the CRR’s post COVID online penetration already begun to
rate forecasts indicates that this level will re-shore or
now be reached by 2021, suggesting the nearshore some
“COVID impact” will accelerate the online operations.
retail sales growth trajectory by one year.
Chart 1: Online retail sales as a percentage of total (%)
2019 2020 2021
30%
25%
26.2%
24.3%
20%
19.9%
19.4%
18.7%
15%
16.2%
15.9%
15.3%
14.3%
13.8%
13.1%
12.5%
12.0%
10%
10.9%
9.9%
9.9%
9.3%
5%
6.0%
5.8%
5.4%
3.7%
0%
Source, Savills Research, Centre for Retail Research
3European Logistics Outlook Summer 2020
European logistics demand shows
resilience through COVID-19
Occupier demand a dominant high street presence. In to see increases in the proportion of
European logistics demand reached Poland, the number of leasing deals lease regears. In Lisbon for example,
12.2m sq m during H1 2020, 4% below shorter than one year signed during H1 84% of first quarter and 78% of second
the five year, half year average (Chart 2). 2020 has already exceeded the previous quarter take up in 2020 was in the form
Portugal (+86%), Romania (+78%), the full year values. In Czech Republic, of lease renewals, citing a lack of supply
UK (+41%) and Poland (+31%) performed Savills estimate that short term leases in the market. Some landlords have
the strongest against their respective accounted for an additional c16-24% of used COVID-19 as an opportunity to
half year averages, however, weaker leasing activity during H1 2020. We are regear leases and increase the WAULT
levels of take up were recorded in France also observing a number of food retailers on their portfolios, offering additional
(-36%), Spain (-31%), Netherlands searching for land plots suitable for months’ rent free in exchange for longer
(-27%) and the Czech Republic (-14%). build to suit development across Central commitments.
This was largely due to the inability to Eastern Europe (CEE) following rising
conduct viewings and sign leases during demand for food delivery on online Business uncertainty however is
Q2 because of government lockdowns, platforms. resulting in occupiers seeking shorter
although Q1 leasing activity remained lease terms. In Germany, we have
fairly resilient. Vacancy rates (%) observed occupiers seeking regears for
Average European vacancy rates three year terms, rather than standard
In the UK, 43% of H1 2020 take-up can increased from 5.1% to 5.8% during the five year extensions as they look to
be attributed to online retailers, with first half of 2020, although this remains ride out the economic uncertainty.
Amazon alone accounting for 36% of the low by historical standards, and well Landlords however are reluctant to
total. Furthermore, 3PLs accounted for below the 12% equilibrium for stable offer shorter lease commitments and
15%, many undertaking contracts for the rental growth observed within the UK. therefore incentives for shorter terms
NHS. Czech Republic (4.4%), Stockholm have reduced. For many occupiers,
(4.0%) and Barcelona (4.0%) remain the existing warehouses are no longer
We have observed an increase in the most undersupplied markets. suitable to meet the increased demands
number of coronavirus related short- of ecommerce. We are seeing a rising
term leasing deals. In the UK, 11% of A shortage of available space will number of 5-10k sq m requirements
deals were short-term lease agreements be the prolonged challenge for many across German cities to meet the level of
as a result of Covid-19, including space occupiers throughout the remainder coverage required for last mile.
to hold excess stock by retailers with of 2020 and into 2021 and we expect
Chart 2: European logistics take up (sq m)
30,000,000 UK
Spain
25,000,000
Romania
20,000,000 Portugal
Take up (sq m)
Poland
15,000,000
Netherlands
10,000,000 Germany
France
5,000,000
Czech Republic
- Belgium
2012 2013 2014 2015 2016 2017 2018 2019 2020
H1
Source: Savills Research
savills.com/research 4European Logistics Outlook Summer 2020
Landlords will be paying closer are observing more multi-storey warehousing in Monchengladbach in order to enhance their
attention to the level of second-hand developments including G Park, Docklands last mile delivery networks, which has piqued
space which could return to the market and SEGRO’s Port de Gennevilliers, Paris investor interest for the subsector. Across
amid business failures over the next 12 prelet to IKEA in 2018, as the provision of European markets, however, land is generally not
months. Foodstores and retailers with an urban distribution remains limited. Likewise, constrained enough to make it viable to develop
established online presence are expected to Amazon have prelet a multi-storey warehouse multi-storey warehousing, such as in Singapore.
be more sheltered to business failure than
those retailers who were slow to adopt an Chart 3: European logistics vacancy rates (%)
omnichannel offering.
12%
Development
The level of new speculative space
coming through remains limited and 10%
developer caution is likely to hold back 9.7% 9.7%
any speculative announcements until 8%
more visibility on the economic impact of
COVID surfaces. In Poland for example, Average, 5.8%
of the 1.9 million sq m of development 6% 6.6% 6.5%
5.9%
forecast for the remainder of 2020, 62% is 5.4%
currently prelet. Likewise, Czech Republic 4% 4.6% 4.5% 4.4%
(55%), Romania (80%) and Sweden (85%) 4.0% 4.0%
pipelines are majority prelet, with several
cases of developers pulling speculative 2%
starts.
0%
As construction periods for logistics
units usually range between 9-12
months, we expect a more limited level
of warehouse completions in 2021.
Developers will then take stock and review
the extent to which occupier demand levels
Source, Savills Research, * = indicative vacancy rate
have normalised as the initial impact of the
coronavirus outbreak subsides.
Chart 4: European logistics prime rents (€ per sq m)
Rents
European prime logistics rents remained
stable during H1 2020, with positive Prime rent € per sq m H1 2020 growth (%)
growth in London (+8%), Hamburg (+7%) € 250 10%
and Frankfurt (+3%) cancelled out by
8%
rental declines in Oslo (-7%), Bucharest
€ 200
(-5%) and Upper Silesia (-3%) (Chart 4). 6%
However, 15 of the 22 markets we cover
reported no headline rental growth during € 150 4%
the first half of 2020 and we anticipate
2%
more subdued net effective rental growth
through 2021 as occupiers take the € 100 0%
opportunity to negotiate more favourable
incentives. -2%
€ 50
We anticipate the rental growth -4%
trajectory for last mile logistics to remain
€- -6%
positive. This is partly due to the shortage
of land allocated to distribution in urban
areas, as rents are forced to compete with
alternative uses.
In order to maximise land utilisation, we
Source, Savills Research
5European Logistics Outlook Summer 2020
Investor demand for long
income intensifies
Investment transactions
Logistics investment transaction volumes The average prime logistics yield also
totalled €13.3bn in Europe during the first remained stable quarter on quarter at 4.58% 12.2m sq m of
half of the year compared to €14.5bn in the (-2bps), 37bps below last year’s level. Madrid and European logistics
same period last year, reflecting an annual Barcelona (4.85%) experienced a 30bps inward take up in H1 2020,
decrease of 8% (Chart 5). Equity-rich European yield shift compared to the previous quarter and 4% below the half
institutions remain dominant, and are showing Oslo (4.45%) -10bps. Due to the growing investor year average.
signs of outbidding non-European capital for interest, combined with the lack of product, we
core assets. Korean investor demand remains expect prime logistics yields to remain stable
strong, although many fund managers have been until the end of the year.
frustrated by the inability to view assets and
undergo due diligence during travel lockdown What’s more, debt pricing has remained fairly
periods and are increasingly reliant on joint stable with pre-COVID levels for core, best in
European vacancy
ventures with European based asset managers. class logistics assets, with some of the most
rate increased to
competitive terms coming from international 5.8% during Q2
Germany overtook the UK as the most active banks and institutional investors. Investor from 5.1% at end
market, exceeding €3bn during H1 2020 and sentiment remains particularly strong for long 2019.
marking a 12% increase against the same period let assets to strong supermarket or online retail
in 2019. The UK (€2.8bn) and France (€2.1bn) covenants. More caution remains for retailers
completed the top three, although Poland (+171% with lower online presence.
yoy) and Netherlands (+23% yoy) recorded
particularly strong increase, with transactions The fundamentals of the logistics sector
volumes totalling €1.1bn and €1.8bn respectively. position it as one of the most resilient through
German logistics
Large portfolio deals located mainly in the UK, this economic downturn, as investors look investment
Netherlands, Sweden, Germany, France, Poland to review their asset allocations in favour of transactions
and Spain boosted the overall European volume. the sector. Nevertheless, the logistics sector increased by 12%
accounted for 11% of the overall investment yoy during H1 2020.
Yields turnover during H1 2020, still in line with the five
A number of ultra-prime assets let to Amazon year average. This is because the availability of
have observed yields move sharper than the stock is still unable to keep pace with investors’
market prime yields, although we feel these are insatiable demand, constraining investment
not reflective of the current market benchmark. volumes in the sector.
Chart 5: European logistics investment €bn
€40
UK
€35 Sweden
Spain
€30 Romania
Portugal
€25 Poland
Norway
€20
Netherlands
Italy
€15
Ireland
€10 Germany
France
€5 Finland
Czech Republic
€0
2013 2014 2015 2016 2017 2018 2019 2020 H1
Source: Savills
savills.com/research 6Savills Commercial Research
We provide bespoke services for landowners, developers, occupiers and investors across the
lifecycle of residential, commercial or mixed-use projects. We add value by providing our clients
with research-backed advice and consultancy through our market-leading global research team.
Investment and Agency
Marcus De Minckwitz Will Percival Stefan Bendix Alexandre Fraigneau John Palmer
Regional Investment Regional Investment Germany France Poland
Advisory Advisory +49 211 22 962 223 +33 1 44 51 73 00 +48 501 203 821
+44 (0) 207 409 8755 +44 (0) 207 330 8628 sbendix@savills.de alexandre.fraigneau@ john.palmer@savills.pl
MdeMinckwitz@savills.com will.percival@savills.com savills.fr
Research
Mike Barnes
European Commercial
+44 (0) 207 075 2864
mike.barnes@savills.com
Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK,
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