Logistics Market

Spain Research– Q2 2019

SPOTLIGHT

Savills Research

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Spotlight Logistics Market Q2 2019

Madrid Market.Take-up and demandThe close to 90,000 sq m let in the Madrid logistics market in Q2 2019 was a considerable increase on the amount let in Q1 2019 (+20%), but the total half-year figure (165,000 sq m) was 64% below that of H1 2018.

The number of lettings performed in much the same way, with a significant increase compared to Q1 2019 (56%), but the H1 2019 total figure was still below that of H1 2018 (the 23 lettings in H1 2019 was 36% less than the 36 lettings registered in H1 2018).

As is the norm, letting activity was primarily focused on the Corredor de Henares and the Southern Area. The distribution of space let was 57% on the Corredor del Henares and 43% in the areas surrounding the A-4 and A-42 (Southern Area). There were also a higher number of lettings on the Corredor de Henares (61%).

In terms of tiers, Tier 1 accounted for slightly more than 50% of half-yearly take-up (close to 85,000 sq m), while Tier 3 accounted for a third of the total (53,000 sq m). The centre and Tier 2 accounted for the remaining 16% (25,750 sq m).

The average size of letting during H1 2019 stood at 7,500 sq m, although figures varied across all tiers. We would note the close to 6,000 sq m in Tier 1 (15 warehouses let) and the 13,200 sq m in Tier 3 (4 lettings).

The main logistics activity in the Madrid market during H1 2019 took place in Tiers 1 and 3

Logistics Market

Graph 2: Logistics take-up by areas in Madrid

Source Savills Aguirre Newman

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Q1 Q2 Q3 Q4 Nº deals (right axis)Corredor del

Henares, 56.7%

Zona Sur, 43.3%

Graph 1: Take-up evolution and no. of deals by quarter in Madrid

During H1 2019, the towns with the highest take-up were San Fernando de Henares (25,000 sq m - five lettings) and Getafe (43,000 sq m - five lettings) in Tier 1, Azuqueca de Henares (31,000 sq m - three lettings) in Tier 3.

Current supplyThe incorporation of 114,000 sq m to logistics stock between January and September, of which 81,000 sq m was vacant, increased supply to 950,000 sq m, putting the vacancy rate at 9.34%.

The distribution of supply primarily coincides with the most active areas. The Corredor del Henares has 542,000 sq m available and the Southern Area 315,000 sq m, with the vacancy rate in both areas standing at between 8% and 9.5%. In contrast, the A-1 area has less supply, but has the highest vacancy rate (26%)

Future SupplyDuring H2 2019 close to 339,000 sq m of vacant space is expected to come onto the market (61% of the total forecast).

Tier 3 comprises around 70% of this space, spread between Illescas (80,000 sq m in the southern area) and Torija, Marchamalo and Guadalajara (64,000 sq m, 47,200 and 40,000 sq m respectively in the Corredor del Henares).

RentsDespite the drop in take-up, rents continue to rise. The average of all completed letting prices saw a

3.5% increase in rents compared to 2018.

The highest rent signed in Q2 stood at €5 per sq m/month. This was signed in the San Fernando de Henares industrial estate, for a very high spec new-build warehouse.

The prime rent continued to stand at circa €5.50 per sq m/month for the best locations in Tier 1 in the Corredor del Henares, a 5% y-o-y increase.

LandInvestors, developers and occupiers all continue to show a keen interest in the land market. Between January and June slightly more than 600,000 sq m of land was sold, primarily in Tier 1 (29%) and Tier 3 (55%). The southern area accounted for 85%.Of note in terms of towns were Getafe (Tier 1 South) with 27% and Illescas (Tier 3 South) with 30%.

Source Savills Aguirre Newman

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Spotlight Logistics Market Q2 2019

Barcelona Market.Take-up and demandThere was a decline in take-up in the Barcelona logistics market during Q2 2019. The slightly more than 121,000 sq m taken is almost 40% lower than the take-up in the same period in 2018, but the excellent take-up in Q1 2019 has left the half-year total at 345,000 sq m (just under the 390,000 sq m achieved in H1 2018).

17 lettings were recorded, in line with the Q2 2018 figure and slightly above Q1 2019. H1 2019 closed with 32 lettings.

The average size of unit taken stands at 10,776 sq m, in line with the 10,580 sq m registered in H1 2018. Only four markets have higher than average take-up: Barcelona, Molins del Rei, Sant Esteve Sesrovires and Les Franqueses del Vallès.

During H1 2019, the lion’s share of activity was split between the centre (38%) and Tier 1 (43%). In Tier 1 the distribution by region was relatively balanced, although in terms of volume the following were of particular note: Baix Llobregat Nord (24%), Vallès Oriental (16%) and Vallès Occidental (12%).

The towns with the highest take-up in each Tier were central Barcelona (130,000 sq m - five lettings), Molins del Rei in Tier 1 (46,000 sq m - one letting), Lliçà d’Amunt in Tier 2 (34,300 sq m - four lettings) and La Bisbal del Penedès in Tier 3 (11,000 sq m - two lettings).

In the Barcelona logistics market, Baix Llobregat has been established as one of the most active zones

Current supplyThe market continues to see a drop in supply. The slightly more than 230,000 sq m of vacant space means the vacancy rate stands at 3.12%.

The largest amount of available space is located in Tier 3 (91,000 sq m), although the highest vacancy rate is in Tier 2 (7.33%). The centre and Tier 1 are close to 100% occupied with vacancy rates of 0.5% and 2.35% respectively.

Future supplyDuring H1 2019 only one 19,000 sq m warehouse was added to total stock and was taken by ACL. Close to 732,000 sq m is expected to come onto the market up to 2020, of which only 262,000 sq m will increase supply (36% of the total).

The lack of available space that meets current occupier requirements continues to favour pre-lets, therefore a significant amount of new space will already have been committed to once delivered (470,000 sq m, equating to 64% of the pipeline).

The vacant space will be distributed between 11 assets across eight towns. Tier 1 will account for 52% of new vacant space, followed by Tier 3 accounting for a third of the total.

RentsBarcelona market rents grew an average of 3% compared to 2018. The most notable increases were in Tiers 3, 2 and 1.

The highest rent registered in Q2 2019 was €7.5 per sq m/month for a >10,000 sq m warehouse in Tier 1 in Vallès Occidental.

The prime rent continues to be €7 per sq m/month.

LandInvestors, developers and occupiers are all showing an interest in the land market. 157,000 sq m of land was sold between January and June, well above the slightly more than 105,000 sq m registered over the whole of 2018.

91% of land sold in 2019 was distributed between the centre and Tier 1 areas, with particular note being Barcelona and Castellbisbal, which accounted for close to 50% of all sales in their respective tiers.

Graph 4: Logistics take-up by areas in Barcelona

Source Savills Aguirre Newman

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Vallès Oriental, 32.3%

Baix Llobregat Sud, 33.9%

Vallès Occidental, 16.3%

Barcelonès, 7.2%

Baix Llobregat Nord, 10.4%

Graph 3: Take-up evolution and no. of deals by quarter in Barcelona

Source Savills Aguirre Newman

4savills-aguirrenewman.es/research

Spotlight Logistics Market Q2 2019

Invesment marketUp to August, the investment market has registered slightly more than €900m, which now equates to 60% of the total invested in 2018. The sale of the Colonial portfolio accounted for close to 50%, but the outlook up to year-end continues to be upbeat, with various deals currently under negotiation. It is therefore expected that the €1,000m mark will comfortably be hit, and that even the 2018 figure of €1.5 bn may be surpassed.

We would also point out that this figure does not reflect the huge pent-up interest in entering the Spanish market, with the only thing holding the market back being a lack of sufficient product that meets investors’ requirements.

The largest transaction was Colonial’s sale of the logistics portfolio it acquired from Axiare to Prologis for a total of €425m. Although almost 80% of the portfolio is located in Madrid, the remainder is located in Barcelona and Seville.

Also of note is the largest single asset purchase recently completed by Savills IM, a Decathlon warehouse in Zaragoza.

Secondary markets (i.e. outside Madrid and Barcelona) are taking on an ever more prominent role and now account for almost a third of all transactions. The Region of Valencia is the most appealing option, but more and more locations are appearing in the north and south of Spain.

YieldsDespite the prime achievable yield remaining at 5.25% in Q2, the supply-demand imbalance is putting pressure on yields. At year-end it could be at close to 5%, as one deal recently closed in Madrid at between 5.25% and 5%.

Secondary product remains at the same level as the previous quarter (6.25%), but this yield profile is expected to harden over the coming months.

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Invest. Vol No. Deals (right axis)

Asset Province Purchaser Vendor

Portfolio Colonial (11

activos)Varias localizaciones Prologis Inmobiliaria Colonial

Portfolio Kefren (cinco

activos)Varias localizaciones

Prologis European

Properties FundKefren Capital

Portfolio (3 activos) Varias localizaciones Pulsar Iberia Logistics NA

Nave Decathlon Zaragoza Savills IM Wayka SA

Pol. Los Gavilanes Madrid M&G real estate Invesco

Granollers Barcelona Segro Properties ID logistics

Torre de Cellers, 5 - Mango Barcelona Jevaso Mango

Pol. Pomar BarcelonaLaSalle Investment

ManagementMetro Properties

Table 1: Main investment deals - 2019 (January-August)

Source Savills Aguirre Newman

Graph 5: Annual evolution of invesment volume and no. of deals*

Source Savills Aguirre Newman * excludes corporate transactions, land and final user purchases

Antonio MonteroLogistics Spain+34 91 319 13 14antonio.montero@savills-aguirrenewman.es

Research

Logistics

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Savills Aguirre Newman Researchaccurate information on the current situation in each of the sectors, helping them make the right decisions at each moment.

Gema de la FuenteResearch+34 91 319 13 14gema.fuente@savills-aguirrenewman.es

Aitor ÁlvarezLogistics Madrid+34 91 319 13 14aitor.alvarez@savills-aguirrenewman.es

Gloria ValverdeLogistics Barcelona+34 93 439 54 54gloria.valverde@savills-aguirrenewman.es

Pelayo BarrosoResearch+34 91 319 13 14pelayo.barroso@savills-aguirrenewman.es

Vanessa ÁvilaResearch+34 91 319 13 14vanessa.avila@savills-aguirrenewman.es