Across Europe, year-on-year rental growth continued to gather pace during the second quarter of 2022, according to new JLL data.
JLL’s European logistics rental index rose 14.2% during the second quarter of this year, higher than the 10.9% recorded in the first quarter of this year. It’s the fourth consecutive quarter of rental growth for the sector.
London saw an unprecedented 51.5% year-on-year increase in Q2, while UK cities Birmingham and Leeds, as well as Prague, also all rose by more than 20% in the same period. A further nine markets recorded rental growth of more than 10%.
Upward pressure on rents is expected to continue during the rest of this year. One of the reasons for the performance is, of course, supply, with landlords and developers pushing through higher land prices and construction costs onto tenants.
Right now, readily available supply of standing vacant and space currently under speculative construction represents less than six months’ worth of take-up recorded over the past 12 months in Belgium, Czech Republic, France, Germany, the Netherlands and Romania.
The post-pandemic growth of online retail, either omni-channel or pure-player – as well as Europe’s shift to grocery home delivery – continues to play its part in driving demand for space and consequently, rental growth. So far, there’s little evidence that inflation’s impact on purchasing power or the pace of consumption has curbed online retail’s ascendancy.
The ever-increasing pool of logistics occupiers also bodes well, with 3PLs stepping up their activity as more manufacturers look to reshore and nearshore, further creating pent-up demand in many markets and demand for space in new markets.
Availability in many European markets is expected to tighten further between now and the end of 2022. While European prime logistics yields moved out by 20 bps in Q2, rental growth continues to curtail impact on investors’ overall returns.