"Europe's logistics property markets are feeling the weight of both a severe economic downturn and a lingering credit crunch," commented Len Sahling, first vice president of the ProLogis Research Group. "The European economies are starting to emerge from several quarters of negative GDP growth, and the logistics property leasing markets will follow suit, albeit with a lag. Meaningful GDP growth combined with obsolescence and no new supply will eventually pull Europe's logistics property leasing markets out of their slump."
Detailed findings in the report include the following:
- During the first half of 2009, leasing market fundamentals continued to weaken throughout Europe, with the pan-European market occupancy rate slipping to 86 percent in the second quarter of 2009 from 87 percent in the previous quarter and 89 percent a year ago.
- New deliveries to the Continental European markets have remained relatively stable throughout the current steep recession, largely because of the sizable overhang of construction projects begun last year before the credit crisis erupted.
- All across Europe, new starts have tapered off in recent months and are now limited almost exclusively to build-to-suit projects. As a result, the construction pipelines have begun to shrink, suggesting that deliveries will soon begin to taper off.
- Investors have developed a renewed appreciation for market risk and are now making sharper distinctions between countries in Europe regarding economic, currency and property market risks. There is a renewed market focus on prime properties in Europe, where the leases have strong covenants and lease terms of five years.
