European Logistics Market Rebounds as Investment Soars Amid ESG and Tech Demands

In a notable turnaround from the economic headwinds of recent quarters, Europe's logistics real estate sector is witnessing an unprecedented surge in both investment and occupancy ambitions. The latest findings, sourced from detailed research by Savills and complemented by insights from CBRE, underscore a market in dynamic transformation.

Investment activity in logistics real estate has reached record highs in the first half of 2024. Total deal volumes climbed to €16.5 billion, an increase of 17% over the previous half-year and 24% higher than the corresponding period in 2023. For perspective, this figure dwarfs the pre-pandemic average.

This remarkable uptick is emblematic of investors' renewed appetite for stability in the logistics space. As European economic growth shows clear signs of improvement, following a period marked by unprecedented shocks and rapid policy shifts, investors are increasingly turning to high-quality, income-producing assets.

Occupier sentiment rebounds

While leasing activity has been relatively subdued, occupier sentiment has rebounded significantly. In a survey of 642 key market players, comprising 78% occupiers, 9% investors, 5% developers, and 8% other stakeholders, 53% now rate current business conditions as more favourable than they were a year ago.

Caution, however, remains a defining theme. Nearly 70% of occupiers have scaled back or delayed expansion plans amid economic uncertainties, with only 6% having abandoned their strategies entirely. Despite these measured approaches, there is clear momentum building: 29% of occupiers are actively advancing expansion plans.

Occupiers show a marked preference for large "big-box" logistics units, 58% favour spaces between 10,000 and 39,999 square meters, while 36% target mid-size units (5,000-9,999 square meters). A smaller fraction is exploring mega units (over 40,000 square meters) or urban logistics facilities.

ESG as a game changer

Environmental, social, and governance (ESG) criteria have emerged as a critical pivot in the decision-making process. A substantial 69% of respondents identified more stringent ESG targets and regulations as a potential "game changer" for their operations. In response, many occupiers have proactively retrofitted existing estates with energy-efficient upgrades: approximately 44% have implemented energy demand reduction measures, and 36% have introduced waste reduction and recycling programmes.

As a result, vacancy rates remain low, and occupier take-up is poised to accelerate further, reinforcing the Dutch market's reputation for resilience and robust long-term growth. For Highvest Capital, these insights are more than just market indicators, they are a call to action.