If we assume 2009 to be the bottom of the cycle (which it generally was other than for Spain), over the past decade capital values have more than doubled in local currency in four of the five markets. The exception is Spain, because the market didn’t bottom out until 2013 in capital value terms.
France, for which we are using Paris, has actually seen the highest value increase at 148 percent, or 9.5 percent per year, as it has seen the sharpest yield compression in the period and the second-highest rental growth. London has seen a 113 percent rise in capital values, partly because the market did not bottom out until 2010 and partly because yields peaked lower than elsewhere at 6.5 percent in 2009.
Over the last nine years (2009-18) take-up across the top 10 markets has increased 155 percent, or 11 percent on average per year, from 107 million square feet to nearly 280 million square feet, despite a dip during the eurozone crisis in 2012-13. There has been an even stronger recovery in new completions, especially in the last three years.
New supply has risen 15 percent a year over the nine-year period to 161 million square feet in 2018. Nevertheless, the average vacancy rate has fallen from a peak of 9 percent in 2009 to just 4.4 percent in Q3 2019 and in 2018 take-up covered new supply by 1.7x.
On the face of it, third-party logistics was the largest contributor to demand for space in the five largest markets in 2018, with 43 percent of the total. At the same time, pure play e-commerce was 14 percent of the total and retail was just 8 percent. However, this understates the total demand from both e-commerce and retail, as the transport and logistics category will include some contracts for e-commerce retailers. Similarly, trade and wholesale is likely to be largely retail related, taking that total to about 19 percent.
We would expect the e-commerce total to continue rising as e-commerce penetration of retail increases across Europe. In the UK, e-commerce accounted for 32 percent of total take-up in 2018 and internet penetration in the UK, at about 18 percent, was twice as high as in Europe.