European warehouse demand above trend

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Demand for large modern warehouse units is expected to remain above the long-term trend in Europe despite a more subdued outlook for manufacturing markets, according to research by Jones Lang LaSalle.

Vincent Lottefier, chief executive, EMEA corporate solutions at Jones Lang LaSalle, said  occupiers continued to pursue supply chain optimisation and realign strategies to meet changing customer requirements.

However, JLL warned that the readily available supply of large modern units is now tighter than a year ago. This, coupled with on-going limited future speculative development, means choice is set to contract further over the remainder of the year, particularly across the main European hubs.

“A weaker economic growth outlook coupled with persistent occupier caution is likely to lead to falling cost levels in a number of markets during 2012. Nevertheless, scarce modern supply means that rental changes will be mostly marginal. Occupier demand still outweighs supply levels which will limit improving occupier negotiation power, in particular within the strategic hubs across Europe,” said Lottefier.

The picture looks slightly better for those occupiers searching industrial space across Central and Eastern Europe. Choice remains higher within the majority of these markets while rental profiles are mostly softer if compared to the core Western European locations. Nevertheless, modern stock levels continue to be significantly lower compared to Western Europe.

Alexandra Tornow, head of EMEA logistics and industrial research, said: “Currently only Amsterdam, Paris, Lyon And Madrid in western Europe and Budapest and Warsaw in Central Europe offer good choice levels. As we do not see speculative development in these markets, supply levels are expected to decline over the next few quarters.

“The only exception remains Russia where a significant amount of speculative development – around 400,000 sq m – means that occupier choice is likely to improve, albeit from a very low level” she said.

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