Logistics warehouse rentals expected to continue to rise in 2023, says ProEquity

• David Martinez, Founder and CEO of ProEquity, "Supply constraints, intensified by inflation, a slowdown in construction and limited speculative projects, will result in continued upward pressure on rental prices in 2023.

Madrid, 28 June 2023. Despite the fact that the real estate sector has been shaken in recent months by the changes in contracting caused by the rise in interest rates, it is expected that the demand for warehouse rental will continue for the rest of the year, which will lead to a rise in rents. According to forecasts by Proequity, a leading property consultancy, the central area and Catalonia will be the most affected by this, especially the latter, where the vacancy rate stood at 3 %.

Although it is true that the increase in the rent for logistics warehouses will not be temporary, due to the fact that the demand for warehouses is currently stable, the vast majority of logistics operators are optimistic. In this sense, experts from Proequity point out that investors are willing to take more risk, as in communities such as Catalonia, in quality warehouses, in the first and second metropolitan area, there is less than 2.27 % of space available.. This is because the higher cost of financing, as well as the increase in construction costs, has led to the delay of projects that were planned for the first half of the year.

Investment in the first quarter of this year was similar to the average volume transacted in the first quarter of the last five years. In line with expectations, 90 1Q03Q of investment was led by international funds together with the assets core y core+The most secure in the market, according to sector studies. Furthermore, according to the same study, one of the major milestones for the logistics market is that, at least for the time being, the expansion of yields primeThe "yield requirement when it comes to buying an asset". They currently stand at 4.75 %, both in Madrid and Barcelona, which is 100 basis points higher than a year ago, the last quarter before the European Central Bank (ECB) changed its monetary policy.

ProEquity points out that, over the last six months, there has been a slowdown in investment activity due to the economic situation. In addition, according to experts from the consultancy firm, the rental market has shown greater dynamism than the sale and purchase of assets, especially in Barcelona. "This scenario, coupled with supply constraints, intensified by inflation, a slowdown in construction and limited speculative projects, will result in continued upward pressure on rental prices in 2023."he declares David Martinez, Managing Director of ProEquity.

Despite this, the large logistics centres in Spain - Madrid, including the central area, Valencia and Barcelona - are at the bottom of Europe in terms of rent evolution, with average accumulated growth of 2 % and 3 % in the last three years, according to the report The Logistics Property Telescope by EY carried out in 2022.

Alternative financing formulas: a priority for the sector's growth

In line with the delay in the construction of logistics warehouses due, among other factors, to the higher cost of financing, both Spanish and international financial institutions are reluctant to cover the costs of speculative projects that do not have an agreed rent prior to their launch, leading to the emergence of new alternative financing formulas.