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East-west divide emerges

Edinburgh top of European industrial rents

EdinburghPrime industrial rents in Edinburgh grew by 11.1% in the first half of this year, the biggest increase in Europe, according to the latest Industrial and Logistics Snapshot from global property advisers, Colliers International.

Glasgow and Manchester (both up 10%), Bristol (up 8.3%) and Rotterdam (up 7.9%) also performed positively and highlighted an east-west divide in Europe.

Eastern European markets showed the biggest declines, with Minsk in Belarus dropping -15.5%,  Kiev in the Ukraine down 14.9% and St Petersburg in Russia down by 8.3%.

Tim Davies, head of EMEA industrial and logistics, at Colliers, said:  “The industrial and logistics market in Europe continues to be characterised by constrained availability of high quality warehouse and distribution space.

“Despite this, prime logistics rents remained stable in the vast majority of markets in the first half of 2015. The supply of quality product remains limited in the UK, and this fact combined with increased demand, has led to a rise in rents across all locations for prime stock in H1 2015.

“The UK continues to lead the way in terms of increased activity, but the rest of Europe is beginning to follow suit.

“All UK markets report increasing rental levels which reflects the fact that levels of supply are being eroded and occupational demand is increasing.  Inevitably with funding more readily available speculative development will occur throughout the regions’ strongest locations.”

Investment highlights

·         The total investment volume for the industrial and logistics properties in the first half of 2015 reached €10 billion in the EMEA region, representing a 9% year on year increase.

·         Strong yield compression took place in all UK markets, with the sharpest falls (-100 bps) recorded in Manchester, Bristol, Edinburgh and Belfast.

·         Key German markets, with the exception of Berlin and Hamburg, also saw further yield compression, as did the main Dutch logistics locations.

·         In Scandinavia, which recorded an 85% annual increase in the industrial investment volumes, the main Swedish logistics markets of Stockholm and Gothenburg recorded a slight compression (-25 bps), as did Oslo, the Norwegian capital (-10 bps).

Mr Davies concluded:  “Investors’ appetite and record-low interest rates continued to drive compression of prime logistics yields. In the first six months of 2015 we saw prime yields tightening in more than half of the markets we monitored.

“In the next 12 months, further tightening of yields is expected across the Netherlands and UK, as well as in Dublin, Central Poland, Warsaw and Bucharest.”

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