European Industrial Market Dynamics, Q4 2024
Summary and analysis of Europe’s current industrial real estate market conditions
- Alexandra Tornow
- Raphaele Naud
JLL’s latest market update highlights an expanding recovery in capital markets while reviewing current headwinds in occupational markets hampering activity. with this copy Summary and analysis of Europe’s current industrial real estate market conditions
Take-up of logistics space improved in Q4 in nearly all markets, pushing the full-year total to 24 million sqm. This was 5% below 2023 but 13% higher compared to the pre-pandemic average, underpinning that activity is returning to more normalized levels.
Rental growth potential by building quality is diverging. Prime rents in markets with lower speculative development continue to grow.
Investment activity showed a notable improvement. A total of € 11 billion was traded in Q4. This brought the total 2024 transaction volume to over € 35 billion, up 23% YoY.
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Take up is slow but steady while upward pressure on prime rents continues as supply of suitable space remains limited
Rising occupier activity during the quarter brought Q1-Q3 total take-up to 17.8 million sqm. While significantly below the record levels of 2021 and 2022, occupier activity remains on track with the five-year average. Notably, Q1-Q3 take-up was the third strongest historically, only surpassed by those of 2021 and 2022.
With occupational demand returning to lower, more sustainable levels and an uptick in speculative completions since the end of 2022, the average European vacancy rate stood at 4.3% at the end of Q3. Though the overall average market vacancy rate is higher, modern space remains limited in most markets which is contributing to continued robust prime rental growth.
Top 3 key trends in Q3:
Leasing activity- Leasing activity still slow but remains on track with the 5-year average. During Q3, take up totalled almost 6.3 million sqm of logistics space or 14% above the previous quarter’s level. Rising occupier activity during the quarter brought Q1-Q3 total take-up to 17.8 million sqm.
Supply- Supply pressure remains high as construction activity struggles to keep up with demand for new space. At the end of Q3, the average European vacancy rate was 4.3%.
Rents- Weighted European average prime rental growth hit 10.8% YoY in Q3 - down from 15.6% YoY in 2022 but above the 5.9% 5-year average pace. In 2018-2022
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“The German logistics real estate market is currently seeing a shift in demand away from e-commerce, furniture, and fashion sectors, and increasingly from pharmaceutical and automotive sectors. For the latter, finding suitable space for the dual production of combustion engines and electric vehicles (EVs) that have different space and energy requirements, is the new challenge.”
Sarina Schekahn
Head of Industrial & Logistics Agency Germany
