"This trend is favored by the shift of manufacturing towards the East – Eastern Europe, but in particular Asia - and the consequent need to import goods back to Europe," says Alexandra Tornow, associate director for EMEA Research at Jones Lang LaSalle in Hamburg. "Coupled with the need to reduce overland costs in mainland transport, mainly through limiting transport routes, logistics operators are increasingly focusing on port or airport-centric logistics locations."
According to Tornow, major logistic markets like Germany, France, Netherlands and Belgium are recording the highest take-up volumes, providing excellent gateways into the wider European market. Chris Staveley, head of JLL's European cross-border team, says he expects Europe's principal existing container ports to continue to attract the majority of logistics tenant demand, but he believes they will increasingly suffer from land constraints, forcing logistics companies to move away from direct seaport submarkets into the wider metropolitan areas.
According to a tenant survey conducted by the company's research team, 41% of respondents prefer being in a 50-kilometer radius of a major seaport. But the report suggests greater land availability and lower land and labor prices farther than 50 kilometers would enable developers to entice tenants outside their current comfort range through cheaper rents.
The report also indicates that the Black Sea region and Turkey are expected to benefit from growing logistics interest the region linking Europe to the Middle East. Improved road and rail connections would also permit more efficient transport by enabling goods shipped by sea from Asia to be offloaded at Black Sea ports for transfer to faster land-based modes of transportation. Meanwhile, JLL researchers say Italy's port areas are likely to suffer because of natural land restrictions and poor infrastructure leading into the main part of the continent.
Despite the long-term potential, the short-term outlook for both seaport and non-seaport markets in Europe is poor. According to JLL's Q3 industrial report, prime rental growth throughout the continent continues to slow. The firm's European Distribution Warehousing Rental Index grew by only 0.3% over the quarter and 2.1% over the last 12 months. The report says future rental growth potential faces further slowing, with more markets likely to see a rental decline. Only four markets - Hamburg, Milan, Utrecht and Moscow -achieved positive rental growth over the quarter, while two – Madrid and St. Petersburg - experienced falloffs. The rest remained stable.
Despite a slowing tenant market, JLL says rents are expected to have held firm in Q4, as increasedconstruction costs and higher yield levels put developers under pressure to reach adequate margins. According to the report, with the majority of markets still recording low levels of vacancy in standing stock and development activity mostly on hold, demand and supply levels remain fairly balanced, allowing most landlords to maintain existing rents. But the company warns the possibility of a further slowing could result in increased vacancies and reduced rents in 2009.
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