The demand for logistics real estate is declining, according to figures that JLL presented on Wednesday during a breakfast session for its clients.
After years of breaking record after record, the market is cooling down. Nevertheless, there is no reason to worry, says Sven Bertens, Head of Research & Strategy at JLL. “The decline can be related to the decline in economic growth figures. Consumer spending has declined and so the demand for products has decreased. It is the new reality, a long-term average.”
According to Bertens, the decline can also be related to the low vacancy rate. Currently only one and a half percent. “A logistics user currently has little to no freedom of choice. If you want to move and there is little to no supply, then moving is not actually an option.”
Vacancy is increasing slightly
JLL sees that vacancy rates are increasing. “There is a clear relationship between the vacancy in logistics real estate and the stock in logistics centers. You saw a peak in this at the end of last year. Consumer spending fell and, as a result, stocks in the centers increased. These stocks have now run out and consumer spending has not yet reached its previous level. This results in more vacancies. Not only in old depreciated buildings, but also in new construction for which no tenant has yet been found.”
High rental prices
Despite the rising vacancy rate, the user still has little choice. Bertens: “That in turn results in enormous pressure on rents. On average, prices have risen by twenty to thirty percent in recent years. These are percentages that we have almost never seen in the past.”
In the past, the strong demand for logistics real estate was mainly driven by new construction, but here too volumes are declining. After 2017, fourteen million square meters of logistics real estate were built in the Netherlands and this was necessary to meet demand. That construction is now at a standstill, Bertens sees.
“This is due to the fact that construction costs have risen sharply, land prices have increased and returns for developers and investors are under pressure. The financial picture cannot always be completed. This means that it is becoming increasingly difficult to meet the demand of the logistics sector.”