Across Europe there has been a huge growth in the amount of speculative space being developed. Indeed King Sturge reports that the amount of speculative space in the UK reached 1.45 million sq m by August 2007 helping to take the total amount of available floorspace in the UK to a record high of 21.24 million sq m.
This figure beats its previous reported gross figure of 20.33 million sq m which King Sturge heralded as the highest since the company first introduced its floorspace survey in 1985.
One of the highlights of recent reports has been the surge in speculative Development. Carl Durrant of King Sturge”s Birmingham Office said: ”I have been in industrial property for more than 20 years and, apart from a blip in the late 1980s, I have never seen since unprecedented confidence by developers in spec-build. Even financial institutions are now increasingly stepping in to fund schemes prior to letting.”
According to Jones Lang LaSalle in the Netherlands there has also been a significant growth in the number of developments of speculative Prime rents decreased by three per cent in Rome and eight per cent in Milan in 2005 and remained stable in 2006. Due to the continuous downward pressure, we expect a further decrease of rental levels in 2007, which would lead to an alignment of rents in the Southern European countrieslarge-scale logistics premises, particularly in logistics hotspots.
While in France Cushman & Wakefield report that supply dynamics look set to change with several large logistics schemes in the pipeline, particularly in the Paris and Lille regions, but also in the secondary poles of Orléans and Normandy.
”If all the current and planned schemes complete there is potential for some overall supply in certain regions, compounded by older space being released as occupiers upgrade.”
Completions in the Paris region reached 160,000 sq m over the quarter to June 2007 although this did not impact on a rise in the vacancy rate as a large proportion of the space was pre-let or absorbed with ease due, in part, to the lack of quality space.
The short term trend for rents for logistics space in the country look set to be stable which must be good news for occupiers.
Jones Lang LaSalle reported that rents in Italy are on the way down. Traditionally an owner-occupier market, vacancy levels for modern distribution warehouses were well below two per cent until the beginning of the 2000s. However, due to increased speculative construction activity over the last few years, the volume of vacant distribution warehousing space has constantly grown. By the end of 2006, approximately 610,000 sq m of vacant space was recorded in Italy, reflecting an overall vacancy rate of 6.1 per cent.
Prime warehousing rents in Italy are amongst the highest, compared to other Southern European countries particularly in the main Italian markets of Milan (€57sqm) and Rome (€60sqm).
However, increasing vacancy levels, the severe pressure from tenants to reduce occupancy costs and fierce competition among investors and developers of distribution warehouses has put downward pressure on prime warehousing rents over the last two years.
”Prime rents decreased by three per cent in Rome and eight per cent in Milan during 2005 and remained stable in 2006. Due to the continuous downward pressure, we expect a further decrease of rental levels in 2007, which would lead to an alignment of rents in the Southern European countries.”
Even in Eastern Europe the supply of contemporary industrial facilities continues to increase steadily. In Bulgaria says Colliers International, there is about 160,000 sq m of speculative space in Sofia alone.