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EMEA Corporate Occupier Conditions –
Industrial • June 2013
Opportunities emerge
despite prolonged
economic turbulence
Despite continued economic challenges, occupier demand for
modern logistics and industrial space remains strong. This, in
combination with reducing choice, is driving occupiers towards
built-to-suit agreements with less flexible lease conditions.
Occupiers looking for cost reductions and those who are able to
accommodate their operations within facilities of lower quality
and/or outside the prime locations, can find opportunities in
secondary stock. Alternatively, they can explore owner-occupier
solutions in those markets which offer low land prices and
construction costs.
Opportunities are uneven across the EMEA region. CEE and
MEA countries stand out as they offer occupiers more choice
and softer cost profiles than Western European markets for both
leasehold and freehold solutions.
2 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
Introduction
Welcome to our latest edition of EMEA Industrial Corporate
Occupier Conditions.
Difficult economic conditions are having uneven implications on
industrial property markets across the EMEA region. As our title
suggests, this has created opportunities for corporate occupiers in
certain markets while other markets offer less favourable conditions.
Our analysis shows that conditions vary by geography and in some
markets according to whether corporate occupiers wish to lease or
own their facilities.
There are two sets of indicators relevant to corporate occupiers
depending on whether they are looking for leasehold solutions or
freehold solutions. Competition for space, occupier choice and costs
such as rents, property tax and service charge are relevant to those
looking to rent industrial space. We have looked at some of these
indicators in previous editions of this report. However, some
occupiers look at freehold opportunities as an alternative to
leasehold solutions. This group includes predominantly
manufacturers who typically require more bespoke property design
solutions and are therefore seeking to buy land to construct their
own facilities, but also retail companies and logistics service
providers wanting to secure a strategic location for the long-term.
Some indicators relevant to this group are industrial land values and
construction costs. Therefore, in order to give occupiers a fuller
perspective of current and future market conditions for both
leasehold and freehold solutions, in addition to existing indicators,
we have included evidence of industrial land values and
construction costs for select EMEA markets in this report.
Currently, our overall assessment of market conditions shows that
occupiers looking to rent industrial space are confronted with
reducing modern choice. However, conditions vary across the
EMEA region with CEE countries generally offering occupiers more
choice and softer cost profiles for modern units than Western
European markets. Even so, there are also windows of opportunities
in Western Europe in particular for those occupiers able to occupy
second-hand units. These occupiers benefit from shorter leases,
significantly lower rents and higher incentives. Alternatively,
occupiers could explore owner-occupier solutions in those markets
which offer low land values and construction costs.
Meanwhile, occupiers should keep an eye on the EMEA region as
new opportunities keep arising. In order to accommodate rising
demand from growing retail and manufacturing sectors, a number of
markets have a pipeline of significant logistics developments. In
combination with improving infrastructure and competitive labour
costs, these are likely to attract increasing occupier interest in the
coming years.
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
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 3
EMEA Industrial Occupier Market Conditions: Summary
Challenging Economic Outlook Continues into 2013
The world economy continues growing but recovery keeps losing
momentum on the back of faltering growth in certain regions. Of
most concern is the continuing slump in the Eurozone. On-going
debt problems, fiscal austerity, high unemployment and political
uncertainty, particularly in peripheral EU member countries such as
Greece, Portugal, Spain and Italy, are all contributing to the region’s
depressed economic outlook. The renewed uncertainties caused by
the Cypriot crisis and an inconclusive general election in Italy, which
threatens any progress on much-needed fiscal reform, have
translated into declining business confidence across the region. As
a result, economic growth forecasts for the Eurozone have been
revised down further to show a fall of 0.6% in 2013, according to
IHS Global Insight, down from a 0.2% contraction anticipated at the
beginning of the year. GDP growth projections for this year have
also been revised downwards in most other economies. On a
positive note, most countries are expected to see higher growth in
2014.
Despite a generally weak European outlook, there are a number of
countries which offer industrial corporate occupiers relatively
favourable economic conditions. Germany and the Nordics are
expected to see positive GDP growth and moderate growth in
industrial production this year, which in combination with low risk
levels makes these countries attractive to occupiers. Central and
Eastern European countries such as Poland , Romania, Russia,
Slovakia and Turkey are expected to see stronger GDP and
industrial production growth in 2013 compared with Western
Europe. Nevertheless, Europe’s crisis has also caught up with these
economies thereby limiting their growth potential.
The Middle East region and part of Africa continue to seek for
stability and recovery from the Arab Spring revolutions and weak
external demand. Nevertheless, occupiers interested in expanding
into this region should look at Morocco and South Africa as these
economies are expected to see significant GDP and industrial
output growth this year. In addition, these countries offer competitive
labour costs and a relatively well-developed infrastructure. In fact,
the latest Logistics Performance Index (LPI) compiled by the World
Bank - which takes into account infrastructure development and
connectivity - puts Morocco and South Africa ahead of some of the
CEE countries.
4 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
CEE Countries Continue to Offer More Choice and Softer
Cost Profiles
There is a continued strong competition for space across the
EMEA markets with high occupier demand meeting limited existing
supply. This means that occupiers continue to struggle finding good
quality industrial space. In the absence of any significant new
speculative development, occupiers looking to acquire new build
stock therefore need to consider built-to-suit solutions, which
normally require longer leases and offer less favourable incentives.
On the other hand, companies, which are willing to accommodate
their operations within existing facilities offering lower
specifications/quality or outside the prime locations, will be able to
source secondary units at a lower cost. Occupiers who would
consider buying land and constructing their own facilities can benefit
from competitive land values and construction costs in select
markets.
Table 2: Property Market Indicators
Choice
Rental Growth
Land Value
Warehousing Construction
(% Vacancy Rate)
Forecast 2013
(€/sq m)
Cost (€/sq m)
Belgium
Low
265
350-500
Croatia
High
50
400-500
Czech Republic
Medium
80
250-450
Finland
Low
220
800-1000
France
Medium
75
300-400
Germany
Low
400
350-500
Greece
Very High
200
400-500
Hungary
Very High
90
300-400
Ireland
n/a
62
600
Italy
Low
150
350
Morocco
Low
150
400
Netherlands
Medium
397
350
Poland
High
125
300
Romania
High
35
300-350
Russia
Low
155
540-690
Saudi Arabia
Medium
n/a
515-725
Serbia
Medium
30
300-400
Slovakia
Low
70
300
South Africa
n/a
102
270-545
Spain
High
450
300
Sweden
Medium
180
800-1000
Turkey
Low
455
n/a
Ukraine
Medium
27
n/a
UAE
n/a
n/a
565-825
UK
Medium
440
340-390
n/a
n/a
Land price: Represents the top open market price per m² that could be achieved for a site that must have planning consent for industrial properties (light industrial / warehousing)
and must be uncontaminated and with no detrimental constraints. It assumes the prime industrial location in each market, with infrastructure and services in place, and with
excellent access to transport networks.
Warehousing construction costs: Costs depend on site conditions and building design. Comparisons across countries are subject to different interpretations, standards for
costing, measurement and construction, and building methods.
Rental growth forecast: The circles above show prime rental growth forecast for the year 2013 for selected European markets with green circles representing tenant-favourable
markets (rental growth <0%), amber circles representing neutral markets (0-1% rental growth) and red circles representing landlord-favourable markets (rental growth >1%).
UAE construction costs from Gardiner & Theobald
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 5
Conditions vary across the EMEA region with CEE countries
generally offering the most favourable environment for both
leasehold and freehold solutions.
With high choice and/or rents expected to fall over the next year,
Hungary, Greece, Poland, Romania, Spain and France are seen
to offer the best rental conditions to occupiers. Current supply levels
in Hungary, Poland and Spain remain significantly above the
average take-up over the last few years. This suggests that existing
supply provides five years of occupier demand in Hungary, two and
a half years in Spain and more than a year in Poland. Due to a
relatively abundant choice, occupiers are able to negotiate
favourable incentives in some of these markets.
Select CEE countries such as Croatia, Romania, Serbia and
Ukraine are attractive to occupiers seeking to construct their own
facilities due to a combination of low land values and construction
costs. Meanwhile, there are also countries in Western Europe such
as France and Ireland which offer competitive cost solutions. In
addition, competitive land values and construction costs make
South Africa a suitable choice for freehold property solutions.
6 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
WESTERN EUROPE:
Corporate Occupier Conditions
Gloomy Outlook This Year
Opportunities in Secondary Stock
A difficult economic climate is predicted to persist in 2013 with
economic growth and industrial production expected to remain
subdued. Germany and the Nordic countries stand out as they are
projected to experience the highest GDP and industrial production
growth this year. Elsewhere, particularly in the southern periphery,
the outlook is considerably worse. Spain and Italy are predicted to
contract by 1.9% this year as the debt crisis takes its toll.
With limited speculative development currently taking place in
Western Europe, available space is expected to contract further.
While only limited rental increases are anticipated this year, over a
three-year period we expect to see rental increases at above 1% on
average per annum in select markets including a number of German
regions, Dublin, London, Barcelona and Stockholm. Occupiers able
to accommodate their operations in facilities offering lower quality
and/or outside the prime locations will still find suitable secondary
units at rents that can be around 30% lower than for prime stock in
certain locations.
Incentives Most Generous in France, Spain and in the UK
A subdued economic outlook is leading to rising occupier caution.
Whilst this in combination with limited choice has led to lower takeup volumes compared with the previous quarter, occupiers continue
to face strong competition in many markets.
That said, some markets such as Paris and Madrid continue to offer
supply levels that can accommodate the equivalent of more than
one year’s demand based on the average activity of the last five
years. As a result, occupiers are in a position to negotiate relatively
favourable incentives in these markets thus achieving significant
discounts to prime rents.
Rent Free Period (Months per annum
for Typical Local Lease Length)
France
4
Spain
2
UK
2
Netherlands
Italy
1-2
1
Germany
0-1
Belgium
0-1
Buy Land in France and Ireland
Occupiers looking to buy industrial land and construct their own
facilities can benefit from competitive land values and construction
costs in select markets. France and Ireland offer some of the
cheapest land plots in Western Europe - costing as little as €30/sq
m in some of the French regions. While construction costs are
generally high in Western Europe, particularly in the Nordic
countries, countries such as Spain, Italy and the Netherlands offer
competitive costs.
The following map provides an outlook of future market conditions
for the period 2013-2015 for selected Western European markets
with green circles representing tenant-favourable markets (rental
growth <0%), amber circles representing neutral markets (0-1%
rental growth) and red circles representing landlord-favourable
markets (rental growth >1%).
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 7
Future rental market conditions
Helsinki
Stockholm
Dublin
Manchester
Birmingham
Amsterdam
London
Antwerp
Lille
Hamburg
Berlin
Rotterdam
Düsseldorf
Brussels
Frankfurt
Paris
Munich
Lyon
Milan
Marseille
Madrid
Year
2013
13 14 15
Barcelona
Tenant-favourable markets (rental growth <0%)
Neutral markets (rental growth 0-1%)
Landlord-favourable markets (rental growth >1%)
Rome
8 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
Belgium
Prime Rent: €46/sq m pa
Land Value: €190/sq m
Choice: Low
Antwerp
Gent
Brussels
Prime Rent €55/sq m pa
Land Value: €265/sq m
Choice: Low
Prime Rent €43/sq m pa
Land Value: €160/sq m
Choice: Low
Occupiers looking for large modern warehousing space to lease
are faced with restricted choice as there is limited supply currently
available across the country. As a result, there are two options
available to occupiers. Those who are willing to pay higher rents
and accept longer leases can sign up for built-to-suit solutions.
Alternatively, occupiers which do not necessarily need state-ofthe-art modern facilities can look at secondary units at a lower
cost. Rents for these units range from €38/sq m pa in Gent and
Antwerp to €44/sq m pa in Brussels, and they are expected to
decline further over the next year.
Finland
Due to low choice, limited incentives and high rents, opportunities are
limited for occupiers looking to rent industrial space. However,
opportunities exist for owner-occupier solutions. While land values in
the Helsinki Metropolitan Area are high (around €220/sq m),
occupiers can buy cheaper land plots in regional sub-markets such
as Kuopio and Tampere where prices are at around €40 - €50/sq m.
Prime Rent: €96/sq m pa
Land Value: €220/sq m
Choice: Low
Helsinki
.
France
Prime Rent: €43/sq m pa
Land Value: €45/sq m
Choice: Low
Paris
Prime Rent €46/sq m pa
Land Value: €45/sq m
Choice: High
Lille
Prime Rent: €52/sq m pa
Land Value: €75/sq m
Choice: Medium
Lyon
Marseille
Prime Rent: €48/sq m pa
Land Value: €35/sq m
Choice: Medium
Current supply levels remain significantly above the average takeup over the last few years suggesting that existing supply still
provides more than one year of demand. Therefore, occupiers are
still able to negotiate favourable incentives - up to five months rent
free a year for a standard lease length. Property tax can vary
between €4/sq m pa in the regional sub-markets to €20/sq m pa in
the Paris region, thereby increasing overall occupier cost
significantly in this area. Occupiers looking to buy land can find
very competitive prices compared with other Western European
countries with plots in the Lille-Paris-Lyon-Marseille axis range
from €35/sq m to €75/sq m.
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 9
Germany
Prime Rent: €67.2/sq m pa
Land Value: €150/sq m
Choice: Low
Hamburg
Prime Rent €64.8/sq m pa
Land Value: €200/sq m
Choice: Low
Berlin
Prime Rent €56.4/sq m pa
Land Value: €100/sq m
Choice: Low
Düsseldorf
Occupiers in search of modern space are faced with strong
competition as modern supply remains squeezed, particularly in
the “Big 5” markets, which is expected to lead to rising cost levels
in select markets. Meanwhile regions in Eastern Germany such as
Leipzig and Dresden continue to offer a higher choice and
consequently lower rents. In Leipzig, the prime rent stands at
€48/sq m pa while rents for secondary space are around €34/sq m
pa.
Frankfurt
Prime Rent €76.8/sq m pa
Land Value: €250/sq m
Choice: Low
Prime Rent €72/sq m pa
Land Value: €400/sq m
Choice: Low
There are wide differences in opportunities available to occupiers
looking to buy land. Land values in Berlin are around €100/sq m
compared with up to €400/sq m in the Frankfurt region.
Munich
Ireland
An improved economic backdrop is leading to rising occupier
demand at a time when the market does not offer sufficient prime
space to accommodate this demand. This is expected to lead to
rising prime rents in Dublin from next year onwards. Opportunities
remain in secondary units which cost around €43/sq m pa.
Meanwhile, land plots are priced very competitively - between €37/sq
m and €62/sq m in the wider Dublin region, offering the alternative of
building new facilities for owner-occupation.
Prime Rent: €59.2/sq m pa
Land Value: €62/sq m
Choice: n/a
Dublin
.
Italy
Prime Rent: €50/sq m pa
Land Value: €150/sq m
Choice: Low
Milan
Veneto Region
Prime Rent: €48/sq m pa
Land Value: €150sq m
Choice: Low
Rome
Prime Rent: €55/sq m pa
Land Value: €150/sq m
Choice: Low
Available supply is getting tighter. Based on the average take-up
over the last few years, existing supply currently provides less than
one year of occupier demand. As a result, incentives remain
limited compared with other countries. Furthermore, prime rents,
expected to remain stable this year, are expected to rise in 2014.
Occupiers looking for cost reductions and those who are able to
accommodate their operations within facilities of lower
quality/specifications and/or outside the prime locations, can find
opportunities in secondary stock. Rents for secondary units stand
at around €40/sq m pa across the regions.
10 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
The Netherlands
Reflecting average quarterly take-up level of around 330,000 sq
m, the Netherlands currently still offers more than three years of
modern supply. However, high prime rents in the main hubs (e.g.
Amsterdam Schiphol area at €85/sq m pa) are turning occupiers
away. As a result, occupiers are increasingly turning to secondary
locations and/or units which offer more cost-effective solutions.
For example, secondary rents in the Brabant region stand at
around €40/sq m pa which is significantly lower than rents in
Amsterdam or Rotterdam whilst still conveniently connected to
large European consumer markets.
Prime Rent: €85/sq m pa
Land Value: €397/sq m
Choice: Medium
Amsterdam
Rotterdam
Prime Rent: €62/sq m pa
Land Value: €225/sq m
Choice: Medium
Spain
The market continues to offer plenty of existing modern facilities.
Current supply levels remain significantly above the average take-up
over the last few years suggesting that existing supply provides more
than two and a half years of occupier demand. As a result, occupiers
will continue to take advantage of favourable market terms and we
expect to see on-going relocations to modern units. Nevertheless,
choice for modern product is slowly starting to become more
restricted due to a lack of speculative development in combination
with healthy demand levels. As a result, we expect competition for
prime space to intensify. Meanwhile occupiers with lower
quality/specification requirements can find secondary units in Madrid
at around €37/sq m pa and in Barcelona at €60sq m pa, significantly
below the prime rent.
Prime Rent: €75/sq m pa
Land Value: €450/sq m
Choice: High
Prime Rent €60/sq m pa
Land Value: €170/sq m
Choice: Very High
Barcelona
Madrid
Valencia
.
Prime Rent: €27/sq m pa
Land Value: n/a
Choice: Vey High
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 11
Sweden
Occupier conditions have been broadly unchanged over the last
year with modern choice remaining at a low level. Occupiers can
find more choice and lower costs in secondary units – with rents
normally 15-20% below the prime segment across the regional
sub-markets.
Prime Rent €105/sq m pa
Land Value: €180/sq m
Choice: Low
Prime Rent: €87/sq m pa
Land Value: n/a
Choice: Low
Stockholm
Gothenburg
UK
Reflecting average quarterly take-up level of around 365,000 sq m,
the UK currently still offers more than one year of supply. As a result,
occupiers are still able to negotiate relatively favourable incentives for
existing buildings – around two months a year per a five year lease
contract. However, with choice diminishing due to little speculative
development, we anticipate prime rents to stabilise whilst incentives
are expected to move in. Occupiers able to accommodate their
operations in units with lower quality/specification standards and/or
outside the prime locations will still find second-hand units at
reasonably lower prices (€57/sq m pa in Birmingham, €115/sq m pa
in London and €48/sq m pa in Manchester).
Prime Rent: €67/sq m pa
Land Value: €80/sq m
Choice: Medium
Manchester
(North West)
Prime Rent €73/sq m pa
Land Value: €102/sq m
Choice: Medium
Birmingham
(West Midlands)
Prime Rent: €165/sq m pa
Land Value: €438/sq m
Choice: High
London
12 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
Western European Occupier Markets at a glance
Choice
(% Vacancy Rate)
Rents
(€/sq m pa)
Rental Change
Market
Q1 2013
12-month
outlook
Prime rent, Q1 2013
Quarter-onquarter (%)
Year-on-year
(%)
12-month outlook
Amsterdam
Medium
▼
85.00
0.0
-5.6
►
Antwerp
Low
►
46.00
0.0
0.0
►
Barcelona
High
►
75.00
0.0
-3.8
►
Berlin
Low
►
56.40
0.0
0.0
►
Birmingham
Medium
►
73.00
0.0
0.0
►
Brussels
Low
►
55.00
0.0
0.0
►
Dublin
n/a
n/a
59.20
0.0
0.0
►
Dusseldorf
Low
►
64.80
0.0
0.0
▲
Frankfurt
Low
►
72.00
0.0
0.0
►
Hamburg
Low
►
67.20
0.0
1.8
►
Helsinki
Low
►
96.00
0.0
0.0
►
London
High
►
165.00
0.0
4.0
▲
Lyon
High
►
46.00
0.0
0.0
▼
Madrid
Very High
►
60.00
0.0
0.0
►
Manchester
Medium
►
67.00
0.0
0.0
►
Milan
Low
►
50.00
0.0
-9.1
►
Munich
Low
►
76.80
0.0
1.6
▼
Paris
Medium
►
52.00
0.0
0.0
▼
Rome
Low
►
55.00
0.0
-3.5
►
Rotterdam
Medium
►
62.00
0.0
0.0
►
Stockholm
Low
►
105.00
0.0
0.0
►
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 13
CENTRAL AND EASTERN EUROPE:
Corporate Occupier Conditions
Strong Economic Growth in Russia and Turkey
Poland, Romania, Russia, Slovakia and Turkey are likely to see
relatively strong economic growth despite a generally bleak
economic outlook in Europe as a whole. Russia and Turkey stand
out with expected growth rates above 3% this year. Nevertheless,
we continue to observe cautious occupier behaviour in some of
these markets reflecting a relatively high risk in combination with low
transparency in real estate markets. The weakest economic
conditions this year are expected in Greece, Croatia, Hungary and
Ukraine as these countries are forecast to remain or slip back into
recession.
Favourable Conditions for Occupiers in 2013
While supply continues to fall in most CEE countries due to limited
speculative development, occupier requirements are still relatively
easy to fulfil. Based on the average take-up over the last few years,
current supply in Hungary provides five years of occupier demand
while it provides more than a year in Poland. Meanwhile, occupiers
are faced with restricted choice in Russia as available modern stock
provides less than six months of take-up.
Due to relatively abundant choice in some CEE markets, occupiers
are able to negotiate favourable incentives - around one month rent
free a year for a standard lease. An exception is Russia where
limited available supply means that occupiers are not in a position to
negotiate favourable lease terms.
Rent Free Period (Months per annum
for Typical Local Lease Length)
Czech Republic
1
Hungary
1
Poland
1
Romania
1
Slovakia
1
Russia
0 - 0.5
Driven by an abundant choice, including many attractive options
across the well-connected regional markets, prime rents are
expected to fall in Budapest and Warsaw this year.
Competitive Land Values
Occupiers seeking to buy land and construct their own facilities can
find numerous opportunities across CEE. Land values and
construction costs are generally lower than in Western Europe.
However, there remain significant differences. While Croatia,
Romania, Serbia and Ukraine offer very competitive land prices in
Istanbul they are some of the highest in the entire EMEA region due
to restricted land availability. This limits the development of new
industrial facilities which are needed to accommodate rising demand
from growing retail and manufacturing sectors.
The following map provides an outlook of future market conditions
for the period 2013-2015 for selected CEE markets with green
circles representing tenant-favourable markets (rental growth <0%),
amber circles representing neutral markets (0-1% rental growth) and
red circles representing landlord-favourable markets (rental growth
>1%).
14 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
Future rental market conditions
St Petersburg
Moscow
Warsaw
Kiev
Prague
Bratislava
Budapest
Zagreb
Belgrade
Bucharest
Istanbul
Year
2013
13 14 15
Tenant-favourable markets (rental growth <0%)
Neutral markets (rental growth 0-1%)
Landlord-favourable markets (rental growth >1%)
Athens
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 15
Croatia
Occupier requirements are relatively easy to fulfil as there is still
plenty of choice in the market. As a result, occupiers can still
negotiate favourable incentives – around one month rent free a
year for a standard lease length. Meanwhile, Croatia’s accession
to the EU and improved railway connection between the Port of
Rijeka and Zagreb, is expected to lead to a rising number of
international companies entering the market. This is likely to lead
to stronger demand eating into the existing modern supply quickly.
This will restrict occupier choice to secondary units which can be
acquired at around €54/sq m pa in Zagreb.
Zagreb
Prime Rent: €69/sq m pa
Land Value: €50/sq m
Choice: High
Czech Republic
Occupiers are struggling to fulfil their space requirements. Based on
average take-up levels over the past five years, available supply
currently provides less than one year of occupier demand. Choice is
expected to fall further due to limited speculative development and
on-going demand which is coming mostly from manufacturing
companies. With secondary rents not being significantly different
from prime rents and costly built-to-suit solutions, occupiers might
increasingly consider constructing their own facilities. Land values
are competitively priced at €40-€80/sq m around Prague while
construction costs range from €250-€450/sq m.
Prime Rent €46.8/sq m pa
Land Value: €80/sq m
Choice: Medium
Prague
Pilsen
Brno
.
Prime Rent: €48/sq m pa
Land Value: €60/sq m
Choice: Low
Prime Rent €51/sq m pa
Land Value: €70/sq m
Choice: Medium
Greece
Prime Rent: €46.8/sq m pa
Land Value: €200/sq m
Choice: n/a
Athens
Occupier conditions remained broadly stable over the last year.
Occupiers can fulfil their requirements relatively easily as demand
remains low compared with existing supply. As a result, prime
rents continued to decline over the quarter in Q1 and they are now
more than 20% below the level seen last year. With on-going
limited demand and plentiful choice, particularly in the broader
Aspropyrgos area (Athens), rents are expected to fall further over
the next 12 months.
16 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
Hungary
Based on average take-up levels over the past five years,
available supply (currently standing at around 395,000 sq m)
provides around five years of occupier demand. With such plentiful
choice and demand expected to remain weak, competition for
industrial space remains limited. As a result, existing space is set
to become even cheaper in Budapest over the next year.
Budapest
Prime Rent: €45.6/sq m pa
Land Value: €90/sq m
Choice: Very High
Poland
Occupiers in search of space can find numerous opportunities in
Poland. Available supply in Warsaw provides nearly two years of
occupier demand if considering average annual take-up levels over
the last five years. Driven by limited competition, rents are expected
to fall further this year.
Occupiers seeking to buy land will find the lowest land values outside
the Warsaw region, ranging between €36-€48/sq m in Poznan. In
contrast, land prices reach €125/sq m in Warsaw. Construction costs
are around €300/sq m which makes building facilities for owner
occupation an attractive option.
Prime Rent €48/sq m pa
Land Value: €48/sq m
Choice: Low
Poznan
Warsaw
Wroclaw
Prime Rent: €45.6/sq m pa
Land Value: €60/sq m
Choice: Medium
Prime Rent: €43.2/sq m pa
Land Value: €125/sq m
Choice: High
.
Romania
Prime Rent: €48/sq m pa
Land Value: €35/sq m
Choice: High
Bucharest
Occupier requirements can be fulfilled easily as demand meets an
abundant choice. As a result, rents are expected to decrease
slightly over the next 12 months. Occupiers looking to buy land
and construct their own facilities can benefit from low land values
in Bucharest (€30-€35/sq m) and competitive construction costs
(around €300-€350/sq m).
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 17
Russian Federation
St Petersburg
Prime Rent: €105/sq m pa
Land Value: n/a
Choice: Low
Occupiers are faced with restricted choice. Available modern stock
provides less than six months of take-up in Moscow and St
Petersburg. This means that occupiers are not in a position to
negotiate favourable lease terms. This in combination with high
additional costs (e.g. property tax is around €18/sq m pa) means
occupier conditions remain tight. However, occupiers looking to
buy land can find fairly competitive prices in Moscow – with land
values between €25-€155/sq m.
Moscow
Prime Rent: €109/sq m pa
Land Value: €155/sq m
Choice: Low
Slovakia
Opportunities are limited for occupiers looking to rent industrial
space. Available modern stock currently provides only around six
months of take-up. While speculative development was strong during
the previous year, this has now changed and the majority of
developments are pre-let. This means that occupiers looking for new
space are required to commit to longer leases and less favourable
terms. With land prices around €70/sq m in the Bratislava region,
they might consider owner-occupier development as an alternative.
Prime Rent €43.8/sq m pa
Land Value: €70/sq m
Choice: Low
Bratislava
.
Serbia
Belgrade
Prime Rent: €48/sq m pa
Land Value: €30/sq m
Choice: Medium
Occupiers in search for space are struggling to find good quality
stock. With choice expected to decrease further due to limited
development activity, occupiers might therefore consider owneroccupier development. Land prices, at around €30/sq m in
Belgrade, are some of the lowest in the region.
18 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
Turkey
Turkey offers favourable economic and demographic conditions.
However, the modern industrial real estate stock remains scarce.
With continued high demand in particular from 3PLs and the ecommerce sector, competition remains strong. As a result, rents,
which remained stable at €60/sq m pa quarter-on-quarter and
year-on-year, are likely to increase slightly over the next 12
months. High land prices and limited land availability remain the
main factors behind the low development activity. This also means
owner-occupier development is not providing a favourable
alternative to leasehold solutions.
Istanbul
Prime Rent: €60/sq m pa
Land Value: €455/sq m
Choice: Low
Ukraine
Occupier choice continued to decrease over the last six months. The
vacancy rate currently stands below 10% - reflecting 110,000 sq m of
available modern supply. On the other hand, occupiers seeking to
buy land can find cheap land plots – with prices between €14-€27/sq
m in the Kiev region.
Kiev
Prime Rent €65/sq m pa
Land Value: €27/sq m
Choice: Medium
.
Central and Eastern European Markets at a glance
Choice
(% Vacancy Rate)
Rents
(€/sq m pa)
Rental Change
12-month
outlook
Prime Rent Q1 2013
Quarter-on-quarter
(%)
Year-on-year
(%)
12-month
outlook
n/a
n/a
46.80
-2.5
-20.4
▼
Belgrade
Medium
▼
48.00
0.0
0.0
►
Bratislava
Low
►
43.80
0.0
-1.4
►
Budapest
Very High
▼
45.60
0.0
0.0
▼
Bucharest
High
►
48.00
0.0
-3.6
▼
Istanbul
Low
n/a
60.00
0.0
0.0
▲
Kiev
Medium
►
65.00
0.0
0.0
n/a
Moscow
Low
►
109.00
3.7
3.7
►
Prague
Medium
▼
46.80
0.0
0.0
►
St. Petersburg
Low
►
105.00
3.8
12.5
►
Warsaw
High
▼
43.20
0.0
0.0
▼
Zagreb
High
►
69.00
0.0
-4.2
►
Market
Q1 2013
Athens
Source: Jones Lang LaSalle, May 2013
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 19
MIDDLE EAST AND AFRICA
Corporate Occupier Conditions
Growing Consumption and Manufacturing Activity
Large-Scale Developments Underway
Economic growth in the MEA region is expected to be stronger if
compared to Western Europe and CEE this year, although growth
will be lower than 2012 due to reduced oil prices and output, and
weak external demand.
There are a number of new developments currently under
construction – the most notable being the large economic and
industrial cities in the UAE and Saudi Arabia. Once fully completed,
these developments will offer good quality product and proximity to
the newly developed or improved seaports and airports. This is likely
to attract strong occupier interest to these areas. High demand is
expected to lead to rising rents in the UAE and Saudi Arabia.
However, occupiers comfortable to sign land leases should be able
to achieve a more cost-effective solution.
Private consumption and manufacturing output growth is seen at
around 5% pa on average between 2013-15 in Morocco, Saudi
Arabia and UAE. In order to support this growth, a number of
markets have a pipeline of significant logistics developments. In
combination with improving infrastructure and competitive labour
costs, this is likely to attract increasing occupier interest in the
coming years.
Private Consumption
Manufacturing GDP
(Annual Growth
(Annual Growth
2013-15 %)
2013-15 %)
Morocco
5.0
5.0
Saudi Arabia
5.3
5.2
South Africa
3.4
3.6
UAE
5.0
5.3
A favourable industrial real estate offer can also be found in South
Africa and Morocco. Due to low competition, landlords in
Johannesburg continue to offer incentives (tenant improvement
allowances) to retain and attract occupiers. Occupiers seeking to
buy land and construct their own facilities will find competitive land
values and construction costs in the wider Johannesburg area.
Meanwhile, occupiers in Morocco are likely to benefit from
opportunities arising in the new industrial zones currently under
construction in the wider Casablanca region.
Rent Free Period
(Months per annum for Typical Local Lease Length)
Rent incentives are generally uncommon
Market Coverage
UAE and Saudi Arabia
Morocco
Casablanca
Riyadh
Jeddah
South Africa
Johannesburg
Dubai
Abu Dhabi
20 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
UAE
Prime Rent: €117/sq m pa
Land Value: n/a
Choice: n/a
Dubai
Abu Dhabi
Prime Rent: €85/sq m pa
Land Value: n/a
Choice: n/a
New projects currently under construction, including Dubai
Industrial City (DIC) and Dubai World Central (DWC) are likely to
attract high occupier demand. These areas offer good quality
product, proximity to the newly developed Al Makhtoum
International airport and the Port of Jebel Ali which is undergoing a
major expansion. As a result, rents are expected to rise over the
next year.
Lease terms remain highly uneven across Dubai. The shortest
leases can be negotiated in the older onshore areas and freezones while occupiers might need to commit to a lease length of
up to ten years in the areas currently under development such as
DIC.
Saudi Arabia
Occupier demand in Jeddah remains focussed on the King Abdullah
Economic City (KAEC) while in Riyadh occupiers focus on the Sulay
area due to better infrastructure and higher choice. Occupiers in
Jeddah are likely to benefit from expansion in the Jeddah Islamic Port
and a new port development in KAEC driven by increasing trade
activity. However, high demand is likely to lead to increasing rents
over the next 12 months. While land sales are uncommon in the
industrial areas, occupiers might consider land leases which offer the
potential to negotiate interesting incentives such as relaxation in
custom duties on machinery and equipment if land is rented in the
third industrial city in Riyadh.
Prime Rent: €58/sq m pa
Land Value: n/a
Choice: n/a
Riyadh
Jeddah
Prime Rent: €57/sq m pa
Land Value: n/a
Choice: n/a
On Point • EMEA Corporate Occupier Conditions – Industrial• June 2013 21
South Africa
Johannesburg
Structural economic woes such as labour disputes, low consumer
confidence and rising operating costs are seen to lead to restricted
occupier demand. This in combination with a fairly stable choice is
keeping competition at a low level. Therefore, in order to attract
and retain occupiers, landlords continue to offer incentives such as
tenant improvement allowances. There are also opportunities for
occupiers intending to construct their own facilities as South Africa
offers competitive land values and construction costs.
Prime Rent: €56/sq m pa
Land Value: €102/sq m
Choice: Low
Morocco
Occupiers are struggling to find good quality industrial space in
Casablanca. Choice, currently at a low level, is likely to improve once
a 57,000 sq m speculative development is completed in the south of
Casablanca. Occupiers are also likely to benefit from opportunities
arising in the new industrial zones currently under construction in the
wider Casablanca region. For example, industrial zone dedicated to
heavy industry in proximity to Jorf Lasfar port, 150 km south of
Casablanca, will provide 500 hectares of industrial land upon its
completion. Land values in Casablanca range from €50/sq m to
€150/sq m.
Casablanca
Prime Rent: €62/sq m pa
Land Value: €150/sq m
Choice: Low
22 On Point • EMEA Corporate Occupier Conditions – Industrial • June 2013
Glossary
The industrial real estate market encompasses a wide range of
different building types used for manufacturing, processing, storing
and transport, as well as research and development. Industrial
buildings are divided into three main building groups: heavy
industrial, multi-let light industrial and warehousing.
Our market data covers the 11 main European logistics markets:
Belgium, the Czech Republic, France, Germany, Hungary, Italy, the
Netherlands, Poland, Russia (Moscow and St Petersburg only),
Spain and the UK. Our analysis is based on units > 5,000 sq m for
Continental Europe and > 10,000 sq m for the UK.
Warehousing properties referred to in this report comprise property
assets dedicated to the storage and distribution of goods typically
with a minimum floor space of 5,000 sq m gross internal, with ceiling
heights over 8 metres. Warehouse types included encompass
storage warehouses, distribution warehouses (freight forwarding),
cross-docking warehouses and cold storage warehouses. The office
component of warehousing properties is usually between 5-10%.
Prime industrial/warehousing rent represents the top open
market rent that could be expected for a notional warehousing unit
(see above definition for warehousing space) of the highest quality
and specification in the prime location within a market.
Take-up represents floor space>5,000 sq m acquired within a
market for occupation by lease, pre-letting, pre-sale or acquisition
for owner-occupation during the survey period. A unit is taken-up
when a legally-binding agreement to occupy/acquire the unit has
been completed.
Note: Units that are ‘under offer’ at the survey date are not included
as take-up. ‘Under offer’ refers to space where terms have been
agreed between parties and legal representative, but legally-binding
contracts for letting – or sale for owner-occupation – have yet to be
exchanged and/or completed.
Warehousing Completions represents floorspace>5,000 sq m
completed during the survey period within a market, ready for
occupation.
Space ‘under construction’ represents floorspace>5,000 sq m
‘under construction’ as at the survey date (at the end of each quarter
period) within a market. ‘Under construction’ means that works on
the industrial unit must have started.
Build-to-suit (BTS) developments represent developments >5,000
sq m which are projected by a developer but where construction
only starts upon the completion of a legally-binding agreement for
occupation. Specification and concept of the facility will normally be
adapted to the occupiers needs.
Vacancy/vacancy rate represents completed floor space offered on
the open market for leasing or sale. The unit must be available for
immediate occupation on the survey date. It includes all vacant
accommodation, inclusive of sub-letting space, irrespective of the
quality of space or the terms on which it is offered.
Note: Vacancy excludes ‘obsolete’ or ’mothballed‘ industrial
property, i.e. floor space held vacant and not being offered for
letting, usually pending redevelopment or major refurbishment.
Rental changes
Choice
Low: <5%, Medium: 5 – 10%, High:10 – 15%, Very High:>15%
Business Contact: Corporate Solutions
Vincent Lottefier
Chief Executive Officer
EMEA Corporate Solutions
Paris
+33 1 40 55 49 92
[email protected]
Report Contacts: Research
Alexandra Tornow
Associate Director
EMEA Research
Frankfurt
+49 69 2003 1352
[email protected]
Dr Lee Elliott
Head of Corporate Occupier Research
EMEA Research
London
+44 (0)20 3147 1206
[email protected]
Nejc Jus
Research Analyst
EMEA Research
London
+44 (0)20 3147 1254
[email protected]
EMEA Corporate Occupier Conditions - Industrial – June 2013
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.
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