"Despite the turmoil in the financial markets, 2007 was a record year for investment activity in the industrial sector in Continental Europe, with volumes up by $2.58 billion in 2006 to $30 billion in 2007," says Aymeric de Sérésin, a director in JLL's pan-European investment team. "In the majority of the recently emerging markets, such as Russia or the CEE (Central and Eastern Europe) countries, the share of owner-occupier developments remains high, limiting opportunity for investors. Whilst investor interest in those markets is increasing, the limited opportunity has driven yield levels down, minimizing the risk premium within these markets and so investors remain cautious."

In the UK, Europe's largest warehousing investment market, volumes decreased by 35% year over year to $8.56 billion, while in Germany, the largest Continental European warehousing investment market, results remained broadly in line with the previous year, with $4.58 billion transacted. Investment activity in France more than doubled to $3.7 billion, and the Netherlands for the first time broke the $2 billion mark, with the total up 30% in 12 months. In Central Europe, total investment volumes were up by 50%, while Southern Europe experienced a 37% decline, largely due to a near 70% decline in the Spanish market. The most significant drop in investment levels, however, were recorded in Russia, which saw a nearly 90% decline to a mere $207 million. But the cause was limited opportunity rather than a fall in investor demand, which remains high.

According to the report, growth in outsourcing and an expanding retail market are fueling tenant demand. Absorption increased to a record 156 million sf, compared to 131 million sf in '06. While the Central and Eastern European markets had the greatest absorption growth, Germany, the UK and France accounted for nearly 44% of total absorption levels. Construction activity remained buoyant, up 18% over the previous year, with approximately 108 million sf completed. Russia recorded the greatest amount of new supply at 18.3 million sf, followed by Germany at 16 million sf, the UK at 12.9 million sf and Poland at 10.76 million sf. Very few markets saw declining construction levels. A pipeline of over 124 million sf is due to come on line this year, with German and Russia leading the pack at 16.1 million sf and 15 million sf, respectively.