Across Europe, markets have stabilized as the impact of COVID-19 on logistics real estate has begun to dissipate, with strong investor demand for the sector driving yield compression. The rent growth outlook has become more positive as markets have steadied and supply-side constraints have remained intact, driven by low levels of speculative development in most continental European countries. Land scarcity is also affecting rent growth. Prologis published its third-quarter global earnings announcement along with its European and Central European performance update.
Key takeaways regarding the European logistics market:
- Customer sentiment improved across Europe in the third quarter as market consensus on the near-term impact of COVID-19 became clearer, with businesses adjusting their operations according to prevailing conditions and preparing for second waves of infection rates.
- Demand for space is being driven by essential goods and e-commerce companies, with above-average demand from food and home goods suppliers.
- The average vacancy rate rose marginally over the period by 70 basis points, to 4.1%.
- Rents declined by -0.4% compared with the prior quarter.
Operating performance of Prologis Europe as of September 30, 2020:
- Total portfolio: 19.0 million sqm.
- Period-end occupancy: 95.9% compared to 96.6% in Q2 2020, with the majority of markets reporting stability.
- Total Q3 2020 leasing activity: 1,030,400 sqm (321,000 sqm of new leases and 709,000 sqm of lease renewals).
- Year-to-date 2020 leasing activity: 2.6 million sqm (614,000 sqm of new leases and 2.0 million sqm of lease renewals)
Capital deployment in Q3 2020:
- The third quarter saw six new BTS development starts across Europe, one each in Poland, the United Kingdom, Germany and France and two in Italy, for a combined total of 212,000 sqm.
- 279,000 sqm of acquisitions were completed in Q3 2020, including six warehouses in Belgium, five in Spain and one each in the Netherlands and Italy.
- Five parcels of land were acquired totalling 233,000 sqm in Italy, Germany, the United Kingdom and Belgium.
Central Europe
Prologis in Central Europe (Poland, Czech Republic, Slovakia and Hungary), ended the third quarter of 2020 with a total portfolio of 4.27 million sqm. Occupancy stood at a stable 94.1% (compared with 95.9% in the same period of 2019). 470,267 sqm of leases were signed during the quarter and throughout 2020 Prologis CE signed deals covering 1,271,072 sqm, which is equivalent to the total 2019 leasing activity. Q3 2020 registered one development start totalling 11,079 sqm at Prologis Park Ruda-Śląska.
