Prospects for the industrial sector within the EU appear healthy as confidence improves and growth accelerates in the continent’s major economies. During December 2005, manufacturing growth grew at the fastest rate in 16 months – largely due to greater export volumes fuelled by a weakening of the euro against the dollar in 2005.
Despite high oil prices, there is a growing belief among manufacturers and economists that the economic outlook for both EU and non-EU countries is positive after a sustained period of stagnation. The outsourcing of logistics functions to accession and pre-accession countries continues to fuel demand for third party logistics service providers across Europe. This factor has been driven by increasing cost pressure upon manufacturers and retailers and is a key driver of demand for large units.
The UK warehouse investment market remains the most active in Europe. Total returns over the 12 months to January were at their highest in over five years at 18.4%. The market outlook also remains positive, as occupier demand strengthens and rents are anticipated to pick up in 2006.
The key Benelux markets, the major gateway to the Western European economies from the UK and beyond, are strengthening. In Belgium, Brussels and Antwerp are enjoying an improvement in occupier demand, although the impact of any recovery is yet to reach many secondary markets.
Prime distribution rents now stand at circa € 592 per sq m per annum with prime yields currently in the region of 7.5%. Occupational markets in the Netherlands are also picking up. Demand has emanated out from the traditional core markets, primarily the Amsterdam Airport Area and Rotterdam, with occupiers who were once focused on these areas willing to take premises elsewhere in the Netherlands or over the Belgium and German borders. Prime distribution yields in the Amsterdam area currently stand at 7.5%.
The weight of domestic and foreign capital chasing limited stock continues across Europe, placing downward pressure on yields. The low cost of borrowing within the Eurozone is helping to maintain strong investor demand, with the regional French and Spanish markets two of the principal targets.