Prologis, the global leader in logistics real estate, is increasingly focusing its attention to new developments in mainland Europe in addition to the UK, Ben Bannatyne, president Prologis Europe, told PropertyEU in an interview.
According to the company’s Q2 earnings report, Europe accounted for 10 of the 16 biggest projects completed worldwide in the three months to 30 June. ‘We’ve seen a shift from the US to the UK and now to mainland Europe,’ Bannatyne said. ‘Continental Europe was lagging, but it’s now getting into its stride.’
The biggest project completed during the period was a 143,300 m2 warehouse for German carmaker BMW in Munich. Other major developments included a 47,200 m2 retail warehouse for Action in Paris, a 41,550 m2 project for e-commerce provider AO in Cologne and a 32,600 m2 warehouse for food distributor Globus in Prague. One of the smallest projects completed was a 5,400 m2 development in Augsburg for a local German e-commerce player Media Concept.
US e-commerce giant Amazon has been the centre of media attention in the European logistics segment, but national players are also getting a piece of the action, Bannatyne noted. ‘Amazon is globally dominant, but national players are driving a lot of the uptake in the occupier market across Europe as they continue to expand.’
Supply remains tight
Supply of Class-A distribution facilities remains low across all European markets, Prologis said in its Q2 earnings report on Tuesday. In the second quarter, Prologis Europe started nine developments in the Czech Republic, Sweden, Hungary, Poland and the UK totalling some 167,040 m2. The bulk – or 62% of the development space was build-to-suit (BTS) and 38% was speculative.
One of the speculative projects launched during the period is a 37,000 m2 logistics facility next to the sea port in the western Swedish city of Gothenburg. The project is due to be completed in Q1 2017.
‘A lot of our development activity has a BTS focus,’ Bannatyne said. ‘When we do speculative projects like Gothenburg we are very conservative about when we are prepared to start and the risk we are prepared to take. We would want to see the project extremely well pre-leased or a strong pipeline of interest before we pull the trigger. In that sense, things are very different to 2008. We are in a very different place with prospects for rental growth and higher occupancy.’
The UK has been ‘by far’ the strongest market in the last 12 months, Bannatyne said, while most of Europe was pretty ‘flattish’ in terms or rental growth. Exceptions include strong core markets like Munich and Prague, he added. ‘There are some pockets that are performing better but Poland and France are on the whole are much more muted. That said, there are differences nationally. Paris has been slower to recover than Lyon, for example. Occupier demand in Paris has not been as strong as you would anticipate.‘
Other projects that Prologis has recently embarked on in Europe include a 33,400 m2 build-to-suit for Sportisimo at Prologis Park Prague-Rudná in the Czech Republic; 21,510 m2 developed speculatively at Prologis Park Budapest-Sziget in Hungary; and a 14,015 m2 build-to-suit for BMW at Prologis Park Pineham in the UK.
We continue to selectively develop in tighter markets with solid operating fundamentals, as a result of low vacancy levels, available equity and strong demand,’ Bannatyne said.
