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Prime net effective rents - November 2018

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Logistics rental values have increased by 5% since Q3 2017

Economic momentum in the Euro area moderated to 0.4% in Q2. The slowdown is largely driven by temporary factors, though confidence is struggling to rebound. This is not helped by Europe’s external environment that is subject to trade policy tensions. Although the trade dispute is largely a US-China one, it has the potential to embroil Europe. If this does not escalate, the Eurozone is forecast to grow by 1.9% in 2018 and 1.4% in 2019. Wages and core inflation pressures are expected to rise only gradually over this year and accelerate in 2019 across Europe. The Eurozone unemployment rate is expected to fall to 7.8% whilst the UK will be flat at 4.1%.

The EU and the UK signed an agreement in November on the terms of the Brexit leaving arrangement. Assuming this is ratified in the UK, BNP Paribas forecast the UK will see growth of 1.3% in 2018 expand to 1.8% in 2019 as uncertainty recedes.

The impact of the economic slowdown has not been so evident in the real estate logistics market. Countries like Spain, Germany and the Netherlands have recorded outstanding volumes of transactions so far this year and vacancy rates have been declining in most European countries, and even stood below 3% in some markets including Barcelona, Rotterdam and Central Poland.

Rents have been increasing by 5% since Q3 2017 reflecting strong demand boosted by e-commerce activities and low levels of supply, particularly for grade A warehouse. This has been exacerbated by increasing construction and employment costs.

 

Prime net effective rents - November 2018
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