Over the course of 2010 most members of the EU-27 recorded a strong bounce-back in industrial orders, these having previously fallen sharply on the back of the global banking crisis. This recovery in trade has had some impact on the occupational market, with prime warehouse rents in both Western Europe and Scandinavia showing improvement, albeit marginal, over the course of 2010. This comment should be tempered by the fact that stability in rents can, in many key centers, be attributed to a lack of prime modern stock as opposed to any dramatic recovery in occupier demand.
Erik Barnekow, Colliers Head of EMEA Industrial & Logistics, commented: "The core markets are characterized by a lack of product fitting the present needs of large corporations and third party providers. In many locations this has been key in helping to put a floor on prime rental levels, while in others it has actually translated into prime rental growth."
Outside of the core markets, Central & Eastern Europe (CEE) saw a fall in prime rents over the year, although the last six months saw the key centers of this region record an average rise in rents of 1%. The picture is less rosy for the Southern European states, which by and large saw falls in prime rents.
Prime yields stabilized or compressed marginally across the key centers of Western Europe, Scandinavia and the UK during 2010. An improving occupational market, and falling relative returns available elsewhere, led increasing numbers of investors to look at industrial and logistics property. In the CEE region, notable yield compression was seen across many centers, though initial yields remain relatively high. In Southern Europe, key centers saw a slight widening of yields. Overall, investment volumes across the continent increased by 54% on 2009, up to 10.6 billion according to Real Capital Analytics, reflecting the improved appetite for the sector.
Looking forward, forecasts from the European Commission suggest that both imports to and exports from EU-27 states will increase over the course of 2011 and 2012. However, we do not expect notable increases in rents over the year, with most occupiers likely to hold fire and see how the economic recovery pans out before committing to expansion.