Well, you might understand my surprise when I heard my colleague Jean-Marie Guillet from our French Industrial Leasing team making this statement just last week. Although 2011 saw the highest take-up on record and a significant decline in available modern space across Europe, so far speculative development has been well off developers’ radar. Instead we have seen developers providing new space on a build-to-suit basis within a fairly short time frame (six months or less for a standard unit of around 10-20,000 sq m). Indeed, today’s difficult lending conditions, plus ongoing uncertainty in economic outlook are further contributing to caution amongst developers.
Why the change?
Looking more closely a different story emerges for logistics real estate: Modern supply levels have fallen dramatically in many European markets, with some struggling to offer immediately available modern buildings on a larger scale. Plus occupier markets remain upbeat. While some of our local teams have seen slightly slowing demand levels, the first quarter of 2012 is expected to mark healthy take-up overall (a notable exception remains the UK).
More importantly, sentiment indicators are improving. The Manufacturing Purchasing Managers’ Indices point to upgrading conditions in the majority of global markets, and although the Stifel Nicolaus Logistics Confidence Index showed lower confidence among air and sea freight forwarders, when asked about conditions over the next six months, both groups indicate significant improvement (standing at respectively 58.7 and 57.2). Finally our own market poll amongst European logistics and industrial market players regarding business conditions over the next 12 months concludes that most expect conditions to remain in line with 2011.
Against this background of even and growing confidence plus lack of supply, equity strong developers might indeed take a fresh look at speculative projects with the intention of taking first mover advantage – and not only in France!