spent online, these countries benefit from an extra 775,000 square
feet of take up of distribution space.
The Eurozone countries have also benefited from the relative
weakness of the euro against the dollar which has made their
goods comparatively cheap to export to established international
markets. It is estimated that exports to the United States from the
European Union countries increased by around 15 percent in the
first three quarters of 2012, with similar growth experienced in
sales to Russia, South Korea, and Japan.
Availability of prime space, where demand is generally focused, is shrinking as there is very little speculative development coming through to replenish stock levels.
There is still room for growth in this end of the market with
just 14 percent of Europe’s industrial space being ‘Class A’,
around four times less than the ratio in the U.S. according
Conversely, availability of secondary space is growing, as
downsizing occupiers are typically releasing stock back onto the
market, often upgrading to more modern accommodation outside
the euro zone, particularly in Eastern Europe.
The situation differs from country to country, but as a whole
it is the traditional quality markets that continue to attract investment. The U.K., despite a 42 percent fall in take up, is still seen
as the safest investment location in, or out of, the Eurozone, and
is ever popular with overseas investors who account for more
than 60 percent of all transactions. This show of faith which saw
it take a whopping 44 percent of all industrial investment across
Europe the first half 2012, is not just down to sentiment and recognition–which are significant– it’s because of what is happening
on the ground.
The internet continues to change the face of the U.K.’s logistics market, and in 2011 online sales grew to about 11 percent
of the total retail market, meaning industrial buildings will in all
likelihood increase in size and demand. The online retail company Amazon made two significant take ups and there are more in
the pipeline. Although challenged on the U.K. high streets, retailers generally are active in the distribution sector. As with Europe
generally, third party logistics companies are struggling to find
the right stock which offers modern efficiencies.
Manufacturing continues to grow, and while the big brands
tend to grab the headlines, the small and medium enterprises have
been one of the strongest emerging sectors from the recession and
have gone about reinventing themselves and adding value to the
supply chain. Five years ago the manufacturing cost differential
between the U.K. and China was 50 percent. This gap is thought
to have closed to as little as 15 percent.
The lack of development in the U.K. in the last three-to-four
years has impacted supply to the point where there is a demand
challenge looming. In the U.K.’s manufacturing heartland, the
West Midlands, following take up from the likes of Jaguar, Land
Rover, and most recently Lear Corporation, with Frogmore’s
RIVET building in Coventry, there is currently no freestanding
new buildings of more than 100,000 square feet available.