Global freight volumes have climbed strongly during the first half of 2010. Freight rates, which significantly fell during the downturn, are also starting to recover as over-capacity is gradually eroding. IATA’s monthly figures show a 34% annual increase in airfreight in May with record high load factors. Sea freight volumes recorded double digit growth during the early months of 2010 in key ports globally. This is particularly good news for forwarders and shipping companies. Furthermore, in Europe industrial production increased more strongly than envisaged in the first months of 2010.
So, is occupier demand for distribution warehousing recovering too? During the early months of 2010 occupier activity has undoubtedly improved – in selected markets. During the first quarter, the UK, France, Germany and Poland recorded higher demand levels compared to the previous quarter. Compared to Q1 2009, only the UK, Poland and Russia recorded an increase but here growth was based on subdued 2009 levels. Overall, the recovery remains patchy and fragile. Nevertheless, further gains will be recorded in Q2 2010 as occupiers are taking advantage of favourable lease terms to make strategic network adjustments. Space consolidation remains high on occupiers’ agendas. However, slightly weakened market sentiment following the recent sovereign debt crisis (as proofed by the downward trend in Eurozone’s Purchaser Managers Index in May and June) will hamper the recovery in occupier demand in the second half of the year and thus thwart a significant increase in annual take-up volumes in 2010.
If there is one conclusion I can draw from occupier demand during the crisis and the first half of 2010 than it is this one: Key international gateway hubs and locations close to large consumer markets remain the most favoured. With the exception of Belgium (suffering from a lack in modern supply), occupier demand in the mature Continental Western European markets France, Germany and the Netherlands remained fairly resilient throughout the economic crisis. Those markets offer multiple advantages stemming from connectivity, and reduction in transport time and journey lengths is outweighing lower labour cost environments. As a consequence, the much discussed mass departure of distribution warehousing occupiers towards lower cost countries in Eastern Europe and Asia has not yet happened nor is it on the horizon. The excellent infrastructure network in Western Europe and the size of its population guarantees that the region will retain high occupier demand going forward.