Real estate news | Logistics: positive outlook for 2024 (report) | MonitorImmobiliare

Two new reports from Cushman & Wakefield, a global leader in real estate services, provide insight into the logistics sector: “European Logistics & Industrial Update H2 2023” which provides insight into key industry trends in Europe and “EMEA City Logistics” with a focus on the growing trend in urban logistics. Both confirm that the sector is still in good health, despite an extremely negative year 2023 in terms of investments.

The general picture highlights a two-speed sector: a real market with robust fundamentals in Europe, despite some slowdowns, and a contracting capital market, strongly negatively influenced by the rise in ECB interest rates.

In more detail, the data shows that in 2023 prime rents in Europe increased by 8.3% compared to 2022, a slowdown from the 15% growth of the previous year but above average growth over five years of the pre-pandemic period, equal to 2.5% per year.
“In Italy, rents continued their growth trend also in 2023, in line with what happened in Europe – comments Anna Strazza, associate director Research Cushman & Wakefield -. After growth of 9% in 2022, Milan and Rome show a further increase in prime rents of 7%. Despite this, Italy remains a relatively cheaper market in Europe, with lower rent levels than other markets such as the Spanish markets, as well as France, England and Germany. This makes it more competitive both for users looking for space and for investors who, in a context of high rates, can bet on a future increase in rents as a lever for value creation.”

Marzio Granata, head of the industrial and logistics agency Italy, Cushman & Wakefield: “The combined increase in construction costs, interest rates and inflation, as well as the limited availability of properties on the market, have mainly contributed to the increase in rents throughout the market. National territory. Milan, Rome and Bologna are the markets that recorded the strongest growth in rents, reaching €65/m2/year, and the expected trend is still upwards.”

The absorption of logistics space in Europe in 2023 showed a slowdown from the record levels of the last two years, with 32.1 million square meters, which however remains above the annual average before the pandemic. 30 million square meters per year. Over the last half-year, signs of an initial stabilization appeared and we expect a lesser reduction compared to 2023 at the end of the year. Some countries in Europe showed a trend contrary to the European average, continuing to grow in 2023 and well above the pre-pandemic average.

“Italy has been a counter-trend market compared to the European average, with an absorption of 2.7 million m2, very close to the 2022 record. Demand is increasingly oriented towards newly built warehouses with high quality standards and with good performance in terms of environmental and technological efficiency. In Italy, this type of real estate represented more than 80% of the total absorption in 2023. Speculative logistics developments with certain implementation deadlines and large logistics platforms allowing spaces to be divided into units between 10,000 and 20,000 square meters, were particularly rewarded, recording short absorption times.”
In 2023, the volume of investments in the European capital market decreased by 43% compared to 2022, reaching around €35 ​​billion. This slowdown has largely been attributed to the cautious attitude of investors, who are waiting to see where interest rates stabilize. However, the general consensus is that from the second half of 2024, rates could fall, improving investor confidence. During 2023, we observed a significant repricing of this asset class: the yields of the main markets showed an overall decompression trend of 125 to 175 basis points from the first quarter of 2022 until the end of 2023 , including 15 to 40 basis points in the second half of 2023. We expect values ​​to stabilize in 2024, which could favor an increase in investment activity.

What do we expect in 2024?
In Europe, the year 2024 still looks positive, even if risks loom on the horizon linked to global geopolitical unrest and a climate of general uncertainty. Absorption will stabilize at levels closer to pre-pandemic volumes and the vacancy rate will remain stable, reflecting developers' strategies adapting new development activity to new demand. Prime rents will continue to grow, although at a more moderate pace.

“The outlook is also positive for Italy, in line with the trend recorded over the last three years in relation to the main European markets, but in 2024 we expect greater caution from the main market players in due to the global macro-economic and geopolitical context. Strong interest is confirmed for spaces close to main logistics hubs and urban areas with increasing attention to ESG criteria, with properties guaranteeing a low environmental impact. New trends are gaining strength, such as the subletting of existing spaces and/or the rethinking of urban spaces in favor of 'City Logistics' activities, which we believe can continue in the future.”
Precisely on the subject of urban logistics, Cushman & Wakefield recently published a City Logistic report which analyzes the strategies adopted and to be adopted in 33 key cities in Europe for the development of this market segment for which the location and type of properties vary from city to city. towards the city, with significant implications on the total costs of operators.
It is expected that by 2027, an additional €109 billion will be spent on online shopping in Europe, making effective urban traffic management and the availability of logistics real estate crucial. Factors such as city size, population distribution, and delivery demand influence delivery strategies, with substantial differences in optimal logistics locations for each city. Operators balance service costs with delivery times and customer service by determining the number and location of logistics facilities. These may include conventional warehouses on the outskirts, multi-story buildings in critical locations, or micro-delivery centers in high-demand areas. The right choices can generate significant operational cost savings, as demonstrated by Cushman & Wakefield's analysis, which found savings of up to 13% by using multiple facilities to serve a single city rather than one. only larger facility.

The city of Milan was also examined, with the aim of providing decision-makers, investors and stakeholders with an analysis to assess possible future choices. Looking at travel time, a strategy with two logistics structures on the outskirts of the city instead of just one seems more appropriate for Milan – taking into account the size of the urban agglomeration, the distribution of the population and the probable demand for packages. In fact, Cushman & Wakefield created a model that demonstrates how citywide transportation costs would be 25 percent lower if two facilities serving smaller areas were used, compared to a single depot covering the entire city. Assuming that the other costs of the two depots are substantially similar, this would result in an overall expense reduction of 13%.

Download the reports

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