The increasing demand for space versus the decreasing availability of development land for logistics
Demand for logistics space has risen rapidly in recent years globally, but especially in the Netherlands. Occupier market statistics illustrate this clearly, with quarterly take-up of over 1 million sq. m. commonplace. Rising global geopolitical tensions have boosted nearshoring strategies for logistics space, while the growth of the e-commerce sector continues to be the most important driver of logistics growth. The logistics sector is not immune to macro-economic headwinds. Take-up numbers dropped by 58% y-o-y in the Netherlands in Q1 2023 as the economy slowed, and total logistics space take-up of 455,000 sq m, which was well below the average of the last 8 years.
The decline is not only due to less favourable economic circumstances
The drop in take-up can also be viewed as the result of a lack of available space, and not simply as an effect of decreasing demand. At the start of the second quarter of 2023, the vacancy rate of logistics space in the Netherlands is just 3%, which is only 40 bps above the record low of the summer of 2022. In some logistics hotpots in the province of Noord-Brabant like Roosendaal and Eindhoven, the vacancy rate has fallen below 1%. This situation will not change in the short-term, as the availability of land for logistics developments in the Netherlands is limited, and the competition for available land from other sectors is fierce.
The scarcity of logistics space has contributed to rental growth in recent years which continued in the first quarter of 2023.
Prime rents rose in logistics hotspots like Rotterdam (+15.2%) and Eindhoven (+10.7%) over the previous quarter. An important additional driver of prime rents, however, is rising construction costs for new developments.
Prime rents usually refer to new high quality developments which typically demand a rental premium. An increasing number of occupiers will drift towards other locations as a consequence of rising rents, accelerating the trend towards a progressively scattered logistics landscape and raising the visibility of new logistics developments with the general public.
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