Annual prime rental costs for large warehouses in Europe 2023, by city
Across the major European industrial and logistics real estate markets, London had the highest rental rate in 2023. One square meter in a large, prime warehouse in London cost about 310 euros annually in the fourth quarter of the year. That figure reflects the rental cost after any rent-free periods or incentives, excluding taxes and charges, referred to as headline rent. Other markets with high rental rates were Oslo and Birmingham.
What are the most important logistics hubs in Europe?
London’s domestic and international connectivity, thriving business ecosystem, and access to a large consumer base make it one of the most important logistics hubs in Europe. Nevertheless, Birmingham achieved the highest take-up among the major European markets for three years in a row. Birmingham is part of the UK’s golden logistics triangle – an area between Birmingham, Northamptonshire, and Yorkshire that, due to its central location, is within a four-hour drive from 90 percent of the British population. Unsurprisingly, Europe’s three largest economies (the UK, Germany, and France) had the most active logistics investment markets. Combined, the three countries accounted for more than half of the total investment value in the sector.
How profitable is warehouse investment in Europe?
One of the key metrics for measuring the profitability of an investment is yield, or the rental income generated by the property as a percentage of its price. In Europe, yields for prime properties reached up to eight percent, but some markets, such as France and Germany, experienced much lower yields. Though low yields can be interpreted as low profitability, they are usually a sign of strong market fundamentals and sentiment. In conditions of economic growth and steady occupier demand, investors can expect rental and capital growth and are more willing to accept lower yields. On the other hand, when the macroeconomic conditions deteriorate, economic growth slows down, and borrowing costs increase, investors address the higher risk through higher yields.
