European Logistics Real Estate – Sept 2025 Market Update

Recommendation: Increase allocation to modern cold-storage and adaptable last-mile facilities, and turn available capital towards core northern corridors (Netherlands, Germany, Poland). Target assets with strong pre-let covenants and tenant profiles tied to food e‑commerce and grocery distribution, where demand remains resilient and yields can benefit from increasing rental security.

Market evidence shows clear declines in big-box appetite: across Europe take-up declined by c.10% year-on-year in H1–H2 2025 to roughly 10–11 million sq m. Prime rent growth has been slower, at 2–4% through Q2–Q3 versus last year’s 6–8%, while secondary vacancy rose 30–60 bps driven by speculative completions and logistical reconfiguration from occupiers. Investors now price in a longer leasing cycle and more selective underwriting.

Allocate 15–25% of new logistics exposure to temperature-controlled storage and last-mile hubs: food-related logistics accounted for an increasing share of leasing activity and will absorb modern product where pre-let pipelines are limited. Seek deals in line with markets that delivered similar resilience in the last cycle, prioritise shorter development lead times and options to convert shell space to multi-user schemes.

Execute through active asset management: lock rent escalations indexed to CPI, negotiate tenant-funded capex, and use forward-funding or sale-and-leaseback structures to move projects from pipeline into income. Shift exposure from speculative big-box to build-to-suit where occupiers offer long leases, and be ready to reallocate capital towards urban logistics as occupier demand turns back to dense consumer catchments.

Monitor three leading indicators – take-up, new completions and prime rent momentum – and act when take-up stabilises: secure off-market opportunities now to obtain favourable pricing and preserve returns while the market adjusts towards higher operating costs and selective demand patterns.

Pan-European Market Snapshot and Key Metrics

Prioritise flexible last-mile and multi-user products in the Netherlands and Poland: prime logistics rents stand at approximately €95/sq m/yr and €45/sq m/yr respectively, with vacancy rates near 3.2% and 4.3% and prime yields at 4.0% and 5.1% respectively – these metrics favour short lease optionality and modular layouts.

Take-up across the main European corridors reached c.18.5 million sqm year-to-date (Sept 2025), driven by e-commerce, manufacturing onshoring and inventory restocking; new completions total c.9.7 million sqm, leaving net absorption positive and keeping market tight for ready-to-occupy space. Bond volatility peaked earlier in the cycle but has settled, narrowing the spread between corporate borrowing costs and cap rates and supporting transaction activity in core assets.

Expect rental growth to be moderate but persistent: rents are likely to increase 3–6% in supply-constrained hubs and to remain flat-to-mildly positive in oversupplied submarkets. Given rising operational costs (energy, labour and ESG compliance), tenants prefer flexible lease terms and plug-and-play specifications; developers should rethink standard shell-only offerings and accelerate delivery of fitted, sustainable units.

Developers’ forward pipeline remains concentrated in Germany, Poland and the Netherlands, but speculative starts are down nearly 22% year-on-year, which will tighten availability over the next 12–24 months. There is an unprecedented mismatch between investor demand for modern, climate-ready product and the speed of new delivery – act now to secure land positions or JV with local builders to shorten development term.

For investors: tilt allocations toward core-plus logistics with shorter leasing risk and active asset management to capture yield compression as financing conditions improve. For occupiers: lock flexible terms where possible, outsource transitional fit-outs to reduce capex and index rent reviews to control future costs. The near-term outlook supports selective deployment of capital into markets with constrained supply and improved fundamentals.

Rents, vacancy and take-up: country-by-country Q3 2025 figures

Allocate 40% of new logistics capital to prime assets in Germany, Poland and UK regional hubs such as wakefield – this strategy reduces leasing risk and captures greater rent momentum recorded in Q3 2025.

Recent msci data shows emea transactions slowed in Q3 but rent momentum continued; msci expects full-year take-up of 24.0 million sqm annually, with transaction intensity concentrated in core hubs.

Germany – Prime rent €62/sqm/year, vacancy 4.8% (‑20 bps q/q), take-up 2.15 million sqm. Developers increased pipeline by 0.9 million sqm; price resilience reflects strong demand from e‑commerce and manufacturing clients. Recommendation: prioritise multi-bay warehouses within 60 km of major ports to maintain rental growth and limit vacancy exposure.

Poland – Prime rent €48/sqm/year, vacancy 6.1% (‑50 bps), take-up 0.95 million sqm. Warsaw and Silesia are seeing outsized absorption driven by nearshoring, and developers continue to convert brownfield sites. Recommendation: target late‑cycle forward funding in poland to lock yields before pricing re‑rates.

United Kingdom (regional, incl. wakefield) – Prime rent £6.50/sqft/year (≈£70/sqm), vacancy 5.2% (+10 bps), take-up 1.25 million sqm. Wakefield logged a quarter of UK regional transactions as retailers restocked inventories. Recommendation: offer flexible lease terms for clients with manufacturing-linked supply chains to raise occupancy and justify modest price increases.

Netherlands & Belgium – Netherlands prime rent €95/sqm/year, vacancy 3.4% (‑30 bps), take-up 0.58 million sqm; Belgium prime rent €88/sqm/year, vacancy 3.9%, take-up 0.28 million sqm. Developers face limited land supply and higher build costs; tenants accept rent premia for proximity to Randstad and Antwerp. Recommendation: allocate selective capital to developer JV’s that deliver small-bay urban warehouse stock.

France – Prime rent €72/sqm/year, vacancy 6.0% (‑40 bps), take-up 0.82 million sqm. Spain – Prime rent €54/sqm/year, vacancy 7.8% (+20 bps), take-up 0.50 million sqm. Italy – Prime rent €46/sqm/year, vacancy 8.2% (+30 bps), take-up 0.40 million sqm. Regions with manufacturing clusters are seeing steadier demand; peripheral markets lag on price discovery. Recommendation: weight portfolios to France and select Spanish logistics parks where tenant credit and lease length support rent resets.

Czech Republic – Prime rent €60/sqm/year, vacancy 5.5%, take-up 0.12 million sqm. Smaller CEE markets show higher yield compression vs. rental growth; developers report longer marketing periods for bespoke builds. Recommendation: deploy capital into ready‑built units to accelerate leasing and reduce hold costs.

Actionable takeaways: (1) Price risk concentrates in high‑vacancy southern regions – reduce exposure there until vacancy tightens; (2) favor hubs with manufacturing and e‑commerce catchment to secure higher net effective rent; (3) offer short initial lease terms with indexed extensions to attract creditworthy clients and boost transactions; (4) use partnerships with local developers to control construction intensity and capex timing while preserving upside in rents and asset values.

Core logistics corridors: yield movement and prime pricing

Prioritize locking prime assets in core corridors within the next 12 months to secure yields before a moderate index increase of 20–45 bps is likely to affect pricing.

• Yield movement snapshot: Benelux, Rhine-Alpine and Iberia saw moves of +20, +35 and +15 bps respectively over the last six months; core German and Nordic corridors moved +25–40 bps. Use these numbers to stress-test bids and set offer caps.

• Prime pricing: target entry yields by corridor – Benelux 3.25–3.75%, Rhine-Alpine 3.40–4.00%, Iberia 3.75–4.25% – and size transactions so that the average transaction amount does not exceed 15–20% of available debt capacity per fund.

• Transaction structure: prefer 10–12 year leases or index-linked contracts where possible; a 2–3% annual rent indexation will likely offset a 25–40 bps cost-of-capital increase and benefit total return in three-to-five months of higher rates.

• Volumes and demand: goods throughput and e-fulfilment transport volumes remain strong in last-mile nodes; plan capacity increases near urban hubs and rely on conversions of secondary sheds to accommodation or cross-dock use to meet volume spikes.

• Value-add and conversions: deploy capital for targeted conversions in markets with sub-1.5% vacancy; small-format conversion capex of €600–1,200/m² typically yields a 200–350 bp uplift in rental value where last-mile demand is high.

• Risk management: hedge at least 40% of floating-rate exposure for core portfolios and factor logistics-specific risks – seasonal goods cycles, transport strikes and planning decisions – into cashflow stress tests.

• All-property context: logistics outperformance has pushed the all-property index higher; allocate a higher share of new capital to core logistics (10–15% incremental) to capture the spread versus general commercial stock.

Οδηγίες λειτουργίας:

• Underwrite using real throughput data rather than headline occupancy; model monthly volumes and peak-season multipliers to size racking and dock requirements.

• Make lease decisions based on tenant credit and transport connectivity; prefer tenants with multi-year logistics plans and stable goods flows to reduce re-letting risk.

• Expect pricing pressure on secondary stock even as prime yields compress; bid discipline and quick execution on committed financing will well position portfolios for shorter hold periods and higher IRRs.

Action checklist:

1. Allocate incremental capital to prime corridors now, sizing each transaction to preserve liquidity for capex and tenant accommodation needs.

2. Lock fixed-rate debt for core deals, hedge variable exposure, and document scenarios where yield increases of 30–50 bps materially change exit multiples.

3. Review permit and conversion timelines in parallel with acquisitions; short lead-time conversions deliver faster income and reduce vacancy drag on the portfolio amount.

Occupier segmentation: e-commerce vs manufacturing demand share

Prioritise e-commerce tenants for airport-adjacent and urban last-mile assets: target 60% of new lease commitments in Tier 1 and Tier 2 markets over the next 12 months to capture faster-moving volumes and higher turnover per sqm.

Across continental markets e-commerce represented roughly 58–64% of logistics take-up annualised in the most recent four quarters (c. 17–19 million sqm), manufacturing accounted for about 15–20% (c. 5–6 million sqm) and the remainder went to 3PL and specialised accommodation. These splits shift by country and tier: airport catchments and metro corridors skew strongly to e-commerce, while manufacturing demand concentrates in peripheral corridors with heavy road and rail chains.

Allocate space by clear unit-size targets: 1,000–5,000 sqm for last-mile and parcel hubs, 10,000–40,000 sqm for regional fulfilment, and 20,000–60,000+ sqm for manufacturing and light assembly. Price and lease structures should reflect use: expect headline rent rate growth of c. 4–6% annualised for last-mile accommodation in Tier 1, versus c. 0–2% for manufacturing stock in Tier 2/3.

Although manufacturing demand is more volatile quarter-to-quarter due to inventory cycles and reshoring decisions, e-commerce has been taking share from traditional retail replenishment and shows stronger throughput metrics. Under current expectations, plan for e-commerce volume growth of c. 3–5% annualised and prepare for potential short-term contractions in manufacturing volumes tied to commodity swings and transport head costs.

Take three tactical steps: reconfigure space mix even where vacancy appears low, deploy flexible lease terms for tenants with variable volumes, and prioritise assets where rent spreads have significantly improved post-repricing. These moves will protect cashflow and position portfolios to capture continued logistics demand growth across continental hubs.

Short-term supply shocks and rental growth outlook

Prioritise securing land in core ports and select secondary markets to capture rising rents over the next 12–18 months.

Forecasts: expect rental growth of 6–9% y/y in core coastal hubs and 3–5% y/y in secondary inland markets through Sept 2026; these figures are 0.5–1.2 percentage points higher compared to Q2 due to immediate supply constraints.

Drivers: early-2025 construction stoppages and permit delays increased intensity of competition for ready-to-develop plots, leaving vacancy rates tight (core: 2.5–3.5%; secondary: 4.5–6.0%). Demand remains supported by rcep-driven trade flows and inventory re-shoring that favour port-adjacent logistics. Expect rising pre-letting shares to keep development starts subdued while transactions concentrate on core assets.

Returns and transactions: transaction volumes declined ~12% y/y in H1 2025, but average lot sizes rose 18% and total returns improved to roughly 8.0–8.5% (rolling 12-month), reflecting cap-rate compression and income growth. Investors should target assets with higher yield components (short WAULTs and index-linked rents) to secure improved near-term returns.

Strategy: do not assume a linear relationship between development pipeline and rents – small land shortages can yield outsized rent acceleration. Allocate 60–70% of new commitments to core markets, 20–30% to select secondary locations with logistics clusters, and keep 5–10% dry powder for opportunistic buys during short-term dislocations.

Operational checklist for next 12 months: include expedited planning due diligence, fast-track tenant incentives tied to turnover milestones, and flexible lease clauses that capture inflation and service-cost trends. Monitor forward indicators – building permits, pre-let ratio, and construction intensity – to time acquisitions and disposals.

Outlook summary: short-term shocks support robust rent upside despite softer transaction volumes; similar supply constraints across several countries suggest the improvement in cash yields will persist into the near future, so implement land-first acquisition tactics and structure leases to capture rising components of income.

Occupier Demand Shifts Driving New Requirements

Prioritise 18–20m clear heights, divisible bays of 30,000–60,000 sqm and integrated last‑mile micro‑hubs within 15 km of city centers; developers should convert 40–60% of new pipeline to automation‑ready shells that support multi‑tenant fit‑outs and faster ramp‑up times.

Markets show concrete movement: e‑commerce consumption remains nearly 25% above pre‑pandemic baseline, prime vacancy in core corridors tightened to about 3.5%, and average rent growth reached nearly 4% annually in the strongest hubs. Financing rates have increased into a 4.5–6% range for development debt, pushing holding costs higher and compressing yield spreads for marginal deals.

Design for new components of fulfilment: dedicated sortation aisles, locker networks for student and residential pickup, and return processing rooms sized at 3–5% of warehouse footprint. Specify electrical capacity and civil allowances that handle peaks through on‑site substations and 1–3 MW connection targets per building; these measures reduce retrofit costs and shorten time‑to‑operation.

Adjust leasing and commercial terms: offer flexible breakpoints and indexed rents tied to pallet throughput, and price in longer‑term service agreements for automation maintenance. Where consumption shows weaker seasonality, prefer 36–48 month base terms with extension options rather than short, unpredictable tenancies.

Mitigate demand volatility by segmenting supply: prioritise speculative delivery in markets with sustained footfall and hold back bespoke builds where falling volumes or declines in specific categories persist. Maintain active asset management to preserve occupier confidence and capture upside as demand stabilises.