DTZ: European logistics markets - an average 1.4% decline in total occupancy costs during 2011
DTZ ECHINOX - 17 November 2011
European logistics markets experienced an average 1.4% decline in total occupancy costs during 2011 as the uncertain macro economic outlook reduced demand for logistics space. New research from DTZ* reveals that a third of European markets showed significant decreases in total occupancy costs due to rents declining during the course of the year.
Occupiers looking for value are expected to maintain the upper-hand moving into 2012 due to a subdued outlook for the logistics sector.
For the second year running, occupiers in Marseille, Brussels, Antwerp, Lyon, Budapest and Bucharest benefitted from the lowest occupancy costs in Europe. Dublin, previously one of the five most expensive markets prior to 2010, saw significant decreases in occupancy costs, as prime rents fell drastically over the past few quarters. Occupier costs in Bucharest will remain low, as a result of prevailing surplus space, weak economic outlook and low demand.
In contrast, London Heathrow remains the most expensive location followed by Oslo and South-East England. Occupiers in Frankfurt, Lyon and London Heathrow saw the sharpest increase in costs during 2011 predominantly due to rental increases. Frankfurt saw an increase in demand for prime warehouse space due to its position as one of the main transport hubs in the region.
Karine Woodford, Head of DTZ Occupier Research, comments: “The growth in occupancy costs is expected to be weak until 2012, presenting significant pockets of opportunity for occupiers seeking value, before a period of steady growth up to 2014. European markets as a whole are forecast to experience moderate average growth of 1.5% per year until 2016. There is however, a divergence in logistics costs across Europe as a result of differences in supply and demand and differing economic structures within countries.”
The report reveals that the strategic logistics hubs of Antwerp, Rotterdam and Warsaw are expected to continue to see strong demand from both occupiers and investors leading to some upward pressure on rents and as a result increased occupier costs. Manchester is expected to be the fastest growing logistics market in the UK with a corresponding increase in occupancy costs.
During 2012 and 2013 occupancy costs are likely to increase most in markets affected significantly during the economic crisis, such as Barcelona, Madrid and Dublin. However, occupancy costs in these markets at the end of the forecast period (2016) will still be substantially below their pre-crisis levels. Occupiers in Gothenburg, Copenhagen and Oslo are expected to benefit from lower forecast growth in costs due to significant availability of land for new development which is likely to hold down costs for the next few years. Berlin is forecast to have the second slowest growth in occupier costs to 2016 as it doesn’t fulfil strategic logistical requirements. Occupier costs in Bucharest will remain low as a result of low demand.
Rob Hall, Head of DTZ CEMEA Logistics, comments: “Our research reveals the average occupancy costs across the wider European region currently stand at €85 per sq m. France, Southern Europe and Benelux are generally below this figure, with Marseille the lowest at €50 per sq m. The UK and Nordics are above the average, with London Heathrow the most expensive location, currently at €217 per sq m.”
Magali Marton, Head of DTZ CEMEA Research, said: “Occupiers in most European markets can expect to make cost savings in 2012. A reduction in demand from traditional export markets in Europe and also the US will result in dampening occupier cost pressures. However, the impact of the ongoing financial crisis has had a negative impact on speculative development of logistics space across several European markets. The immediate supply of grade A supply is shrinking which may lead to increase pressure on rents and therefore logistics costs in the medium to long term.”
* This second edition of Occupancy Costs – Logistics, presents logistics occupancy costs per sq m per annum across 28 markets in 15 European countries. The report covers the forecast period 2011 - 2016
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DTZ is a global real estate services firm with offices in 140 cities and 42 countries (across Europe, Middle East and Africa, Asia Pacific and the Americas). The firm provides advice and on-the-ground delivery to investors, developers, corporate and public sector occupiers and financial intermediaries. DTZ works with clients across the breadth of their real estate needs, spanning all real estate sectors and encompassing Investment Agency, Leasing Agency and Brokerage, Property Management, Project Management and Building Consultancy, Valuation, Investment and Asset Management, Consulting, and Research. The parent company, DTZ Holdings plc, has been listed on the London Stock Exchange since 1987.
In November 2002, after 9 years of successful operations on the Romanian real estate market, Echinox Consulting entered a partnership agreement with the multinational company DTZ, one of the leading global real estate services companies. Therefore Echinox Consulting became the local DTZ representative office, operating under the trade name of DTZ Echinox. www.dtz.com
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