Pan-European warehouse take-up suggests a drop back to pre-Covid levels in H1 2023

Q2 fared more positively than the previous quarter with take-up totalling 6.4 million sq m, signifying a decline of just 9%. This is compared to Q1, which fell more sharply by 17% when compared to the final quarter of 2022.

Looking ahead, Savills expects to see take-up remain muted in the second half of the year. However, evidence from the analysis of UK requirements data suggests a possible increase in occupier activity in the final quarter of 2023. This saw a decline of 64% over the course of four quarters, reaching its nadir in Q3 2022. Subsequently, the last three quarters have seen a strong recovery, increasing by 75% trough-to-peak. If this pattern is mirrored in other European markets, this could lead to an improvement in take-up figures in Q4.

Andrew Blennerhassett, associate in the industrial & logistics research team at Savills, comments: “The decline in demand is a symptom of weak economic activity on a European and global level. Occupiers, in particular ecommerce firms, rapidly expanded their footprints during the pandemic, but have now been met with economic uncertainty and lower consumer spending leading to an excess of space in the short-term. Regardless of this, we have not seen an insurmountable level of stock return to the market. Indeed, whilst we may not see take-up return to its pandemic era peaks, the current slowdown in activity represents a return to pre-Covid norms rather than a considerable fall in demand for logistics space.”

“What’s more, inflation data has been promising in recent months and the European Central Bank (ECB) has signalled that further interest rate hikes will be data-driven rather than a forgone conclusion after hiking the base rate by 25bps in July. An end to rising interest rates would bring greater certainty to the economy, stimulating both consumer spending and private investment. This, in turn, could generate a new wave of logistics demand in the new year.”

Marcus de Minckwitz, head of EMEA industrial & logistics at Savills, adds: “The trends that have driven occupier demand before and during the pandemic have not reversed. Forecasts for ecommerce revenue and penetration show a return to growth in 2023. Whilst this will not immediately translate into logistics demand this year, occupiers remain forward looking, especially with the availability of stock in many markets still low by historic standards. We have also seen a sharp fall in speculative development in recent quarters, with the space that has come to the market likely to be quickly absorbed as demand returns in the coming years.”