On the Rebound: Rents in Prime European Industrial Markets Are Down, But Growth Is Set to Come Back Strongly
Rents for industrial real estate are generally down by 10 to 20 percent on an effective basis from their 2008 peak and are well below levels that support new construction. In some markets, effective rents are at levels not seen in more than a decade. The good news, however, is that rents are very likely to increase in many hub and gateway markets in 2011 and more broadly in 2012.
RECOVERY IN SIGHT
Although demand for industrial real estate has been very soft in most European markets, our analysis indicates not only that demand will recover, but that it has already begun to do so in some submarkets.
As we look to a recovery in rental rates, we see it taking shape in two phases. First will be the psychological effect between landlords and customers as they anticipate improving fundamentals; landlords will subsequently hold firm on rents while customers try to lock in longer terms at today’s unsustainably low ra