According to research by international real estate advisor Savills approximately 400,000 m² of new logistics space will be delivered in Sweden by the end of 2012, up from 350,000 m² in 2011.
The firm expects this growing trend to continue with a number of larger projects (over 100,000 m²) scheduled for completion in 2013 and more smaller-scale projects likely to be announced during the second half of 2012.
Savills attributes this rise in activity to a combination of an undersupplied market and an increase in demand with occupiers preferring new, purpose-built facilities. In fact, the company notes that the majority of new projects are pre-let and developed for specific tenants who input into the property's design and facilities.
Savills research shows that tenants currently expanding their warehouse space are mainly larger retail companies that want to consolidate their smaller warehouses into one location along with third party logistic companies. Logistics firms such as DSV, Posten and Green Cargo are growing as a rising number of smaller firms choose to outsource the distribution of goods.
In terms of locations, developers are increasingly building outside the main larger cities where land and labor costs are lower. This has resulted in peripheral industrial parks and strategic locations between larger cities such as Jönköping, Örebro and Linköping/Norrköping becoming logistics hubs.
Peter Wiman, Head of Research in Savills Sweden, says: "While larger urban areas such as Stockholm and Gothenburg will remain attractive to developers, investors and occupiers, regional cities with good infrastructure are also in rising demand as land prices are lower allowing for more competitive rents.
"In addition, investors are increasingly focusing on new developments with environmental certifications, which are also proving popular with tenants wanting to benefit from the decreased operational costs in these 'green' industrial buildings, even if this is reflected by a higher rent."
On the investment side, interest in the logistics sector remains strong according to Savills data. The sector's share of Sweden's total property transaction volume has increased over the past three years, rising from 5.3% in 2009, 7.5% in 2010 to 8.1% in 2011.
Total turnover in the sector reached approximately SEK 7.9 billion in 2011 and Savills expects the volume to reach similar levels by the end of 2012. Yields for prime logistics properties currently stand at approximately 6.5%, while secondary property yields reach between 7% and 8% according to Savills data.
Peter, continues: "We believe there is unrealized potential in Sweden's logistics market and expect to see increasing interest from domestic and international investors, particularly for prime logistics properties.
"Those assets that benefit from stable rents with good covenants on lease terms of 15-25 years are predicted to remain popular with investors, while more secondary assets with higher vacancy levels will continue to struggle in the current climate."