Although growth remains slow, demand for new warehouses and distribution facilities in London and other economic hubs remains surprisingly strong.
According to Colliers International, demand is being fueled by anxiety on the part of some institutional investors, who are worried about the future of multifamily markets.
In addition to London, space in other centers with access to good infrastructure, ports and inland distribution centers is also at a premium. Munich is big, thanks to the strong performance of German car makers.
Erik Barnekow, head of EMEA Industrial and Logistics at Colliers said Hong Kong and Sydney are nearing full capacity. Seoul is also big, but it is experiencing uneven industrial demand. Demand is expected to stay strong through the end of the year, with a special emphasis on build-to-suit facilities.
Colliers points out that the recovery of the European logistics market remains patchy, reflecting a lack of momentum in the retail trade.
Although demand in London is strong, the number of modern facilities is limited and there aren’t many new investments. The report found that modern shed space in Greater London is now “severely limited” with only very modest levels of new supply anticipated over the next 18 months.
The Heathrow zone has seen practically no new speculative development over the past four years, which is a direct consequence of the volatile economic climate. It is no better in South, East or West London and there is very little grade A stock available.
However, a few new build-to-suites were constructed over the last 12 months, but vacancy levels are low and there is still a huge shortage of new space coming to market.
