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As demand for space strengthens across Europe,speculative development is not far behind. Liza Helps reports…

Demand for logistics space across Europe continues to strengthen, despite economic and political cross currents.

Property pundits have recorded strong take-up in the first quarter of 2016 with CBRE noting a 4.2 per cent increase in take-up year on year with more than two million sq m transacted. BNP Paribas Real Estate research noted a nine per cent average increase in take-up in the first quarter across Germany, France, the UK, Spain and The Netherlands. (Germany alone accounted for a massive 38 per cent increase in take up).

This article first appeared in Logistics & Supply Chain, July 2016.

This article first appeared in Logistics & Supply Chain, July 2016.

Unfortunately a corresponding increase in development, in particular speculative development has not been as forthcoming. Tim Davies, head of EMEA Industrial and Logistics, at Colliers International, says: “The industrial and logistics market in Europe continues to be characterised by constrained availability of high quality warehouse and distribution space.”

Logan Smith of BNP Paribas Real Estate adds: “There is a lack of new developments to meet new requirements and what speculative development there is, is not enough to offset the lack of new supply.”

This coupled with the high demand is pushing at vacancy rates, which are now at their lowest for a generation. Machiel Wolters of CBRE says: “Vacancy rates have declined further in the first quarter of the year; moving between four and six per cent in the northern Europe markets and between six and nine per cent in southern Europe. The only exceptions to this trend are in the UK and Poland, where vacancy rates have risen due to speculative development.”

The occupier market across Europe has been positively affected by several trends; the automotive sector and omni-channel offerings from retailers. In Germany and Central Europe the recovery of the automotive industry has increased demand for warehouse space. The impact of omni-channel offerings by retailers across Europe has meant that there is an increased demand for large-scale central hubs, return centres and city distribution facilities.

“In addition pure-play e-commerce is also having an affect,” says Xavier Van Reeth of CBRE, “E-commerce growth is around 15 per cent a year and what is interesting is that compared to other classic retail, e-commerce requires around three times more warehouse space.”

According to Prologis demand indicators remain positive across its European portfolio, it notes: “Net absorption, the sum of new requirements, expansions and net of contractions, reached 1.8 million sq m in 1Q 2016, approximately 70 per cent higher compared to the same period last year. Customers experienced vast growth in the past few years and maximized the utilisation of their current space, resulting in an expansion need to match long-term business plans. Looking forward, further economic growth could both create additional need for growth for these customers and act as a catalyst to quicken the pace of decision-making.”

While a lack of space and increased demand should bring a corresponding response from developers, rent levels are not attractive enough to spur on speculative development. Although rent levels have increased in regions such as the UK creating a positive affect on appraisals there has yet to be significant rent growth elsewhere.

However occupiers looking for build-to-suit are in an enviable position as demand for investment stock is such that rent levels in this sector are actually falling according to Smith.

“Investment competition remains strong for B2S development if there is an occupier happy to go forward then there are five investors happy to fund. There is almost a two-tiered market with the B2S distortion in terms of competition pushing rents down versus everything else where rents are more ‘normal’.

“Rent levels may stay down for a little while but there will come a point where it will hit the floor.”

Smith notes that the limiting factor for B2S ‘is often the availability of an appropriate site with sufficient planning permissions’.

“There is a substantial demand from developers for land sites across all markets.”

Such is the problem that many developers are looking at brown-field sites to redevelop and bring forward.

Wolters notes: “We are seeing small, scarce plots of land being developed into city hubs, and existing properties in strategic locations being redeveloped and redesigned.”

Andrew Gulliford of SEGRO says: “Sites that we have purchased have been more brown-field than greenfield to get the relationship with urban areas. The sites we look at need to be in strong areas of demand with limited supply to make it work – you have to be pretty creative to look at brown-field opportunities as there is more work to do but municipalities are usually on side and locationally these sites can be really strong.

“Occupiers, especially larger customers are pretty savvy on brown-field development and as long as you can show that you have clearly covered environmental issues effectively with the correct documentation and permits then there really is no problem.”

SEGRO is currently demolishing a site at Isle D’Abeau to the south east of Lyons in France that could accommodate up to 50,000 sq m of warehouse space. In addition it is demolishing and clearing a site in Bischosfheim, Frankfurt that could accommodate up to 20,000 sq m.

Goodman is developing a 31,000 sq m logistics centre for pet supplies company Fressnapf on a 47,000 sq m converted brown-field site in the Port of Duisburg in Germany.

Scheduled for completion in December 2016, the €18 million investment features 31,000 sq m of storage space and has a hall height of 12.2m that allows for the integration of high storage racks and a mezzanine of 1,800 sq m. The additional hall height and the 29 loading gates will help ensure efficient intra-logistics.

Including the project in Duisburg, the group is currently developing over 210,000 sq m of logistics space on brown-field sites out of a total of 360,000 sq m for its customers across Germany.

Jordan Corynen, Goodman regional director for Germany, Austria and Switzerland explains: “Land is becoming increasingly scarce in key logistics locations in western Germany, requiring the conversion of brown-field sites, which can often be a complicated and technical process. However, Goodman has developed some of the most extensive experience on the market today and we are able to capitalise on our expertise to find the best locations for our customers to facilitate the growth of their businesses.”

Logistics Capital Partners is not risk averse to securing brown-field sites and one of its most ambitious schemes could provide accommodation for a single modern warehouse of up to 100,000 sq m.

The scheme being brought forward, in conjunction with German Real Estate company Dietz AG, totals 21 ha strategically located within Roosendaal in the Netherlands, one of Europe’s prime logistics hubs.

It is the location of the previously decommissioned Philips factory in the Majoppeveld Noord industrial Park. The site is expected to be delivered cleared and ready for redevelopment at the end of the year.

Kristof Verstraeten, managing director, Logistic Capital Partners, says: “Following our current activity in Roosendaal, and consistent occupier demand, we are thrilled to further extend our involvement in the region by securing this prime redevelopment opportunity right at the heart of the European logistics network.

“The site is also a significant opportunity for an ambitious occupier to acquire a strategic foothold in the European Union, located nearby the ports of Antwerp and Rotterdam.”

That is not to say that there is no speculative development. According to Colliers latest research” “Speculative development is back on the agenda, although not at levels seen pre-crisis and their distribution is uneven across the markets.”

Gulliford notes: “In terms of the larger units we are looking at getting sites prepped and infrastructure in with permissions in place. Occupiers looking for 30,000 – 50,000 sq m are happy to work with developers to get the building right so we do not actually need to speculatively develop at the larger end. Mostly we are looking at speculative development in the region of 10,000 – 20,000 sq m and mostly on the back of a pre-let to another occupier.”

SEGRO built 43,000 sq m of space at its SEGRO Logistics Park Ingolstadt in southern Germany on the back of a 28,000 sq m long lease to Rudolf Logistiks at the remaining space of 15,000 sq m is available in two units.



Goodman is providing speculative space at its latest scheme in Germany in just such a way. It has acquired a 7.2ha site at Bayernhafen Nuremberg, the largest multi-modal freight village in southern Germany, where it will develop a 42,000 sqm logistics centre. It has secured two pre-lease agreements with logistics service providers Stute and DB Schenker, with the remaining space to be developed on a speculative basis.

Logistics developer and investor Verdion has also opted for speculative development in Germany. It is developing 15,000 sqm of Grade A warehouse space at its 92,000 sqm Verdion Airpark scheme, Berlin. The new project is being developed in partnership with funding partners, Rockspring Property Investment Managers on behalf of a discretionary fund, and completion is scheduled for the end of June 2016.

Three new units, each totalling 5,000 sqm will be available either individually or in combination, flexibly designed to suit the strong market demand from 3PLs, retailers and e-tailers seeking urban logistics space, accessible to both Berlin’s Airport and Berlin City Centre.

Verdion Airpark Berlin is located within two km of the new Berlin Brandenburg Airport and adjacent to key road and rail infrastructure. The scheme will be delivered in phases, with both speculative and build-to-suit opportunities for warehousing units ranging from 5,000 sqm to 40,000 sqm. The development has an expected end investment value exceeding €90 million.


Focus on Benelux

Across the region demand remains strong and supply constrained hardly surprising when you realise that the region accommodates the top five best logistics locations in Europe according to recent research by Prologis.

Venlo, a logistics market in south east Netherlands, near the German border, is Europe’s most desirable location by a significant margin, as it was when the research was carried out for the first time in 2013. Venlo came out top in nine of the 11 location criteria, scoring particularly high for ‘availability of land’, ‘road access, ‘transport cost’ and ‘regulatory’.

In second place is Rotterdam, the major port in the west Netherlands, in third the Antwerp-Brussels area in Belgium, followed by Central Brabant and East Brabant in south Netherlands.

It is not surprising then that occupancy rates are high according to Prologis which has leased some 169,000 sq m in the region as at the end of April 2016, occupancy rates are at their highest.

In its latest research Colliers notes that occupiers best means of securing space is down the build to suit route

Much of the demand comes from the e-commerce sector with Coolblue, one of the largest online retailers in Benelux agreeing a second expansion at Prologis Park Tilburg increasing its space there to more than 60,000 sq m. The developer has also agreed a 70,000 sq m build-to-suit deal with XPO at its Prologis Park Eindhoven scheme also in the Netherlands where it has a further 100,000 sq m of space available for existing or new occupiers.

For Goodman occupancy has been at 100 per cent in Belgium and the Netherlands and the developer is seeking to expand its presence in these two locations.

It currently has land in Venlo where it can develop up to 20,000 sq m as well as a site in Puurs, Belgium that could accommodate up to 25,000 sq m known as Brabantstraat 4. The scheme benefits from planning for a warehouse with up to 12m eaves height a 5t/sqm floor loading, specification for one dock door with leveller per 1,000 sqm as well as a 35m-yard.

Xavier Van Reef of CBRE in Belgium says: “In very general terms there is a lot more activity than last year driven by retail and e-commerce. However rents have remained stable with areas such as Antwerp at €46 per sqm per year.”

Occupiers looking for discounted rent levels should look along the Brussels –Liege axis especially for build-to-suit.”

Van Reef estimates that with good negotiation occupiers in this area could get a 30 per cent discount on a build-to-suit compared with rents on the Antwerp – Brussels area.

While most developers are looking at the build-to-suit route there are some willing to entertain spec development in the region.

SEGRO is preparing a 30,000 sqm platform on land it has at De Hoek south of Schiphol airport where it may develop 10,000 sq m speculatively.

It is not just developers looking to speculatively develop, in a bold move Delin Capital Asset Management (DCAM) has revealed plans to move into logistics development and announced its first project in the Netherlands.

The company, which has built a €500 million logistics portfolio since launch in 2012, will speculatively develop a 40,000 sqm warehouse close to the ports of Rotterdam and Moerdijk with a gross development value of €30 million.

The move into development is part of a new strategy unveiled by new chief executive Ekaterina Avdonina. The company’s vision is to become a “multi-faceted leading European logistics real estate company.”

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