1. 2021 saw record €62bn of investment into logistics and industrial assets across Europe, marking a 79% increase on the previous five year average
2. The UK recorded volumes of €19.5bn, 99%above the five year average
3. Take up levels for the sector reached a record 38m sqm, 28%ahead of the previous five year average
4. Undersupply continues to drive demand with record vacancy ratesin Dublin (1.1%), the Netherlands (3.3%), the UK (2.9%) and Denmark (1.9%)

According to Savills, the e-commerce boom is continuing to drive demand for industrial and logistics assets across Europe, as new records were set for both levels of investment and leasing activity in 2021.

Some €62bn was invested into industrial real estate across Europe, marking a 79% increase on the previous five year average. The UK (€19.5bn) outperformed the rest of the continent and accounted for 31% of total investment activity.  Germany (€8.6bn), France (€6.5bn) and Sweden (€5.8bn) and the Netherlands (€5.7bn) also recorded strong levels.

Savills research also noted that investment into industrial assets accounted for 66% of European omnichannel investment in 2021, up from 47% in 2019, as investors were willing to pay premiums to gain exposure to the sector.

“The trend for customers shifting to online shopping throughout the pandemic triggered the e-commerce boom, which has been a major catalyst for this sector’s growth,” comments Mike Barnes, Savills European Research. “So far it has shown little sign of slowing, even as restrictions have lifted and, as a result, the significant weight of capital targeting these assets has compressed prime yields by an average of 27bps to 4.20% over the last six months. Portugal, Spain and Finland have hardened by 50 bps each.”

This demand is clearly represented by the unprecedented levels of leasing activity in the industrial sector across Europe last year, with take up reaching 38m sq m, 28% ahead of the previous five year average. Germany (8.6m sq m), the Netherlands (6.9m sq m) and the UK (5.1m sq m) drove the lion’s share of leasing activity, whilst Romania (+63%), France (+63%) and Spain (+62%) performed the strongest above their five year averages.

Savills has observed that the record shortage of prime stock has driven upward pressure on rents, rising an average of 5% year on year. London (+25%), Dublin (+17%) and Prague (12%) were the fastest growing markets in 2021.

Marcus de Minckwitz, head of industrial & logistics, Savills EMEA, suggests, “Market fundamentals have been hugely favourable for the sector in recent years, and they will continue to underpin another strong performance for the year ahead. Our European Logistics Census last year indicated that 46% of occupiers anticipate that they will increase their warehouse floor space over the next 12 months, among the highest in the online retail sector. With such constrained supply, we expect to see increased development in the sector, despite rising construction costs, as well as appetite for assets in non-core locations as investors move up the risk curve in search of higher returns.”