Corporate occupiers face looming supply shortage

Transcription

1 EMEA Corporate Occupier Conditions - Industrial - December 2012 Corporate occupiers face looming supply shortage Amid economic uncertainty and muted corporate confidence, European logistics and industrial markets continue to see healthy occupier demand. Significant structural changes in the sector and the need to drive direct cost saves require companies to push ahead on supply chain reconfiguration and associated real estate strategies. High competition for modern space is set to continue throughout 2013 as modern supply remains squeezed with development activity firmly focused on pre-let transactions. This will drive occupiers towards built-to-suit agreements with less flexible lease conditions. Prime rents are seen to remain broadly unchanged over the medium term. Nevertheless, there remains a window of opportunity in certain locations for those requirements not focusing on new build options.

2 2 On Point EMEA Corporate Occupier Conditions Indutrial December 2012 Introduction Welcome to our latest edition of EMEA Industrial Corporate Occupier Conditions. Since we published our last report in June, the Eurozone has slipped back into recession. Sentiment amongst manufacturers and retailers has continued to weaken and is now significantly below the levels recorded at the beginning of the year. Although corporate balance sheets have remained positive, subdued business sentiment has resulted in more occupiers adopting a wait-and-see approach. Nevertheless, supply chain optimisation continues to be at the top of corporate agendas, in part to optimise operational costs. Furthermore, the significant changes that are taking place in the retail sector, driven by internet-based retail sales, continue to put additional pressure on occupiers, who are busy re-aligning their existing supply chains and building new multi-channel distribution models. As in the previous editions, in this report we analyse three main property indicators that are relevant to the corporate occupier: competition for space, occupier choice and costs. Currently, the overall assessment of market conditions based on these indicators points to a landlord-favourable market. markets, however the only option remaining is to secure built-to-suit agreements with a lease length of at least seven to ten years. The situation is unlikely to improve in the near future as speculative development will remain constrained. Meanwhile higher availability in second-hand units and smaller lightindustrial facilities means that occupiers less dependent on large modern requirements are able to negotiate shorter leases, lower rents and higher incentives. While headline rents are expected to remain broadly stable across most markets over the next year, occupiers might see costs decreasing in select markets as supply outweighs occupier demand. We trust that you find this report a valuable tool in identifying the opportunities and risks you might face in your decision-making process. We would be delighted to receive any feedback that you may have. Vincent Lottefier Chief Executive Officer EMEA Corporate Solutions Choice levels continue to be on a downward trend overall, although there remain some windows of opportunities in particular for those occupiers able or willing to occupy second-hand units. In many

3 Spain Russia Ireland Eurozone Czech Republic France Netherlands Belgium Italy European Union Germany Hungary Finland UK Poland Sweden Turkey On Point EMEA Corporate Occupier Conditions - Industrial December EMEA Industrial Occupier Market Conditions: Summary Low Growth Environment Expected to Continue into 2013 GDP Growth Projection 2013 The Eurozone economy is still in recession and a sustainable recovery is unlikely before 2014 The strongest growth in 2013 is expected in Central and Eastern Europe, the Nordic countries and Turkey The Eurozone core markets (France and Germany) and the UK are expected to record relatively low growth rates, ranging between 0.5% and 1.2% in 2013 < 0% % % % > 3.0% 1.2% 0.5% 0.4% 2.0% 1.1% 2.4% 0.7% 3.4% Southern economies (Italy, Spain, Portugal and Greece) are forecast to remain in recession next year -2.0% -2.0% 0.5% -0.5% 0.8% 0.8% 1.8% 2.5% 4.2% -3.4% GDP at 2005 prices and exchange rates Source: Consensus Economics, October 2012 Industrial Production Slowing Further Manufacturing production continues to fall in the Eurozone as indicated by the Manufacturing Purchasing Managers Index (PMI) which remained in contraction territory for sixteen consecutive months to November Industrial Growth Projections However, output and new orders declined at a slower pace compared with the previous month 0-2 Forecasts for 2013 indicate that the sharpest falls in industrial production are anticipated in Italy and Spain, while Russia and Turkey will see their production expand at the highest rate amongst the major European countries -4-6 Source: Oxford Economics Economic Sentiment Improved in November but it Remains Subdued The Economic Sentiment Index (ESI) in the EU increased by two points in November compared with the previous month, however it is still below the levels recorded at the beginning of the year Sentiment improved across all sectors except for construction where it remained unchanged compared with the previous month Most EU economies reported improved sentiment in November Economic Sentiment Retail Trade Confidence, Industrial Confidence Source: European Commission, November 2012, Ireland n/a

4 4 On Point EMEA Corporate Occupier Conditions - Industrial December 2012 Continued Strong Competition Logistics Vacancy Rates Despite noting a slight increase in completion volumes in Q3, occupier choice continued to shrink as development activity remains firmly driven by pre-let activity Meanwhile, limited readily available modern supply in combination with heightened occupier caution continues to restrict take-up levels Edinburgh Birmingham Stockholm Helsinki Moscow Occupiers will continue to face strong competition for space in the majority of markets as demand remains high compared with existing supply In order to acquire modern facilities, many occupiers will have no other option but to secure built-to-suit` agreements Madrid Amsterdam Hamburg Rotterdam Berlin Brussels Frankfurt Paris Prague Munich Milan Lyon Barcelona Rome Warsaw Budapest Bucharest <5.0% % % >15.0% Increase y-o-y Decrease y-o-y Stable Source: Jones Lang LaSalle, November 2012 Rents Expected to Remain Broadly Unchanged Next Year Rents were generally stable over the quarter but there were some exceptions: rents fell in Amsterdam, Barcelona and Budapest, driven by higher supply levels Logistics Prime Rents EUR/ m² pa Headline rents are expected to remain broadly unchanged in most markets during the remainder of the year and into 2013 Costs are likely to edge down over the next year in a few select markets: Paris, Madrid, Moscow and Warsaw are the main candidates driven by the high level of modern supply Headline rents are likely to rise next year in a few select Western European hubs such as Frankfurt, Hamburg and driven by further decreasing choice Source: Jones Lang LaSalle Research, October 2012

5 Business Contact: Corporate Solutions Vincent Lottefier Chief Executive Officer EMEA Corporate Solutions Paris vincent.lottefier@eu.jll.com Report Contacts: Research Alexandra Tornow Head of Industrial Research Hamburg alexandra.tornow@eu.jll.com Dr Lee Elliott Head of Corporate Occupier Research +44 (0) lee.elliot@eu.jll.com Nejc Jus Research Analyst +44 (0) nejc.jus@eu.jll.com EMEA Corporate Occupier Conditions - Industrial December 2012 OnPoint reports from Jones Lang LaSalle include quarterly and annual highlights of real estate activity, performance and specialised surveys and forecasts that uncover emerging trends. COPYRIGHT JONES LANG LASALLE IP, INC All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.