In logistics 'prime' rents expected to rise until 2029

The prime rents in the logistics sector will not only not fall, but will grow well above the rate of inflation over the next five years. Taking a snapshot of the galloping rates from 2024 to 2029 was Garbe, during Real Asset Media's European Logistics Real Estate Markets. For the first time, a forecast for the next five years, developed together with Oxford Economics, was added to the usual map of investment indicators.

In the first half of this year, the slowdown in demand resulted in less vigorous rental growth of only 1.4 per cent.
"The regions with the strongest logistics vocation," said Peter Bartholomäus, head of fund management & capital markets at Garbe, "will continue to see rental increases because companies will accept these price levels. The markets with the strongest growth are in the Netherlands and Germany: Venlo (+7.8 per cent), South Limburg (+7.4 per cent), Munich (+7.1 per cent), Eindhoven (+6.0 per cent) and Mannheim (+5.9 per cent).

"If the economy regains momentum," said Tobias Kassner,head of research at Garbe Industrial Real Estate, "and interest rates continue to fall, as the latest ECB cut shows, prime rents will start to grow again and that is what we expect in our five-year estimates.

By how much? The biggest increase in rents will be in London (+3.9% in 2029 at EUR 28.5 per sqm per month), then Germany, with Munich (+3.8% at EUR 12 per sqm per month), Berlin, Hamburg but also Manchester, in the UK, with an increase of 3.5%, but at different prices, EUR 8.6 per sqm in Germany and EUR 10.9 in the UK. After all, from the second quarter of 2019 to the same period in 2024, logistics asset rents increased by 43% in the Netherlands, 42% in the UK and 38% in Germany.

"Demand and the occupancy rate remain high," Kassner added, "and are among the reasons for the continued rise in rents, which have been compounded by increased construction and land costs in recent years. All this leads us to say that rents will continue in their positive dynamic. In addition, the higher rents also help to finance the ongoing transition to ESG standards.