Research– Q3 2020

SPOTLIGHT Savills Research Logistics Market Spotlight Logistics Market Q3 2020

The take-up of more than 650,000 sq m accumulated during the year reflects the excellent performance from the demand driven by e-commerce, representing a growth of 20% compared to the total signed in 2019 (>540,000 sq m)

Economic overview After months of strict lockdown, the return of activity during the summer Logistics considerably eased the critical situation of the country’s economy. GDP grew by 16.7% in Q3 compared Graph 1: Take-up evolution and no. of deals by quarter in Madrid to the previous quarter, although the year-on-year comparison remains Q1 Q2 Q3 Q4 Nº deals (right axis) negative (-8.7). Furthermore, new restrictions established to mitigate 1,000,000 90 the pandemic could slow the recovery in Q4. 900,000 80 800,000 The latest forecasts by Focus 70 Economics for the end of the year place economic growth at 12.3% and 700,000 60 6.6% for 2021, with steady increases starting from Q2. 600,000 50

On the other hand, the labour m 500,000 market figures corroborate the close

sq 40 link between the evolution of the 400,000 pandemic and the country´s 30 economic situation. The October 300,000 data shows that the number of 20 people registered with Social 200,000 Security is stable, while nearly 50,000 more job search 100,000 10 registrations were recorded with the offices of the Public State 0 0 Employment Service. 2015 2016 2017 2018 2019 2020 COVID-19 has made a large impact on trade data and consumer Source Savills Aguirre Newman confidence, continuing the downward trend that was resumed Take-up and demand for the lion’s share with 73% (>305,000 sq m) in June. The October figure (48.50) Despite the nationwide negative macroeconomic across seven deals and Corredor del Henares contracted by 2% compared to the impact caused by COVID-19, demand in the logistics the remaining 27% (>115,000 sq m) across 10 previous month and by 34% market performed exceptionally well. The take-up transactions. compared to October 2019. volume reached in Q3 2020 exceeded 420,000 sq m, The shutdown of commercial a historical record for one quarter, with a 54% y-o-y In the accumulated year, the South Zone activity during the first state of increase. However, it is worth noting that two large represented 52% of the take-up, Corredor del emergency diverted a part of transactions were signed (200,000 sq m and 68,000 Henares 46% and the A-3 Axis the remaining 2%. business transactions towards sq m), representing 63% of the total take-up. Meanwhile, the activity was mainly focused on e-commerce. The Q1 data published Corredor del Henares with 23 deals compared to 13 by the National Commission for The number of transactions was also very positive, signed in the South Zone. Markets and Competition (CNMC) showed a 11.62% y-o-y increase in with 17 deals signed compared to 19 agreements in the volume of transactions. Q3 2019. Two of the most notable transactions in the quarter Although this was a positive figure, in terms of take-up volume were in the third tier of it represents a decline compared to The accumulated take-up volume between January the South Zone, in the municipality of Illescas with the average year-on-year increase and September exceeded 650,000 sq m, a figure that almost 270,000 sq m. Additionally, there were two of 25% since 2014. This can be represents a 20% increase compared to the year-end further agreements in the third tier of Corredor attributed to the precautionary travel recommendations and 2019 (541,000 sq m). By the end of 2020, take-up is del Henares, in the municipalities of Marchamalo mobility restrictions which were expected to be above 800,000 sq m. and Torija with >35,000 sq m and >33,000 sq m, implemented once the state of respectively. emergency was declared. These In the year-on-year comparison in number of deals, factors diminished the volume of a decline of 12% was recorded, with five fewer The distribution in the number of deals per transactions in sectors related to agreements. municipality was fairly homogeneous, highlighting tourism (purchase of transport tickets by air, land or sea, hotel with five transactions, reservations, car rentals, etc.), Amazon, one of the most prominent e-commerce while the towns of and Illescas recorded two accounting for almost 40% of the retailers, has had a very significant impact on the deals each. The rest of the towns only registered total volume. In contrast, an analysis take-up recorded during the accumulated year with one deal each. of activity related to food and more than 290,000 sq m signed. This represents 45% catering (delivery service) offers a of the total, distributed across four deals. In the third quarter, the average deal size in Tier 3 very different perspective, with growth of 40% and 32%, considerably increased (58,226 sq m) compared to respectively. With regards to the take-up distribution area Q3 2019 (26,406 sq m). This remarkable increase during the quarter, the South Zone accounted was due to the aforementioned megadeals. savills-aguirrenewman.es/research 2 Spotlight Logistics Market Q3 2020

Rents Graph 2: Logistics take-up by areas. Q3 2020 Rents from new projects are consolidated in Take-up Nº deals (right axis) both the first and third tiers. 350,000 12

The prime rent for logistics warehouses in 300,000 the best locations continues to stand at levels 10 of €5.50 per sq m /month. 250,000 8 Current supply During the first nine months of the year, 200,000 almost 740,000 sq m of new space was m 6 incorporated into the market, increasing the sq 150,000 stock to 11.3 million square metres. 4 100,000 Of the almost 740,000 sq m of new space, 2 around 500,000 sq m is available for 50,000 immediate occupancy. The incorporation of this new space has increased the availability 0 0 to 1.2 million square metres and places the Corredor del Henares Zona Sur vacancy rate at 10.6%. Source Savills Aguirre Newman

Nearly 590,000 sq m is concentrated Graph 3: Take-up and demand by zone. Q3 2020 in Corredor del Henares for immediate Take-up (%) Nº deals (right axis) occupancy, which represents 49% of total availability. The municipalities that make up 70% 6 the bulk of this available space include San 60% Fernando de Henares, Alcalá de Henares, 5 Alovera, Meco and Cabanillas del Campo. 50% 4 Almost 525,000 sq m is available in the South 40% Zone, representing 44% of the total supply, 3 distributed among the municipalities of 30% Getafe, Illescas, Ontígola and Borox. 2 20% Future supply 10% 1 For the last quarter of the year, it is expected that nearly 174,000 sq m of new space will 0% 0 be incorporated, distributed among the municipalities of Vicálvaro, Marchamalo and Cabanillas del Campo. During 2021, approximately 900,000 sq m Source Savills Aguirre Newman will be developed, of which 55% is available and 45% is already committed. As for the Graph 4: Future supply distribution by tier of the new available Speculative Committed supply in 2021 (almost 500,000 sq m), 45% 1,000,000 will enter the first tier and 30% in the third 900,000 tier. 800,000 Land 700,000 In the Madrid market, the surface area transacted was around 380,000 sq m, 600,000 representing 35% of the national total, 500,000 distributed across seven deals. Activity m

during the third quarter maintained the sq 400,000 favourable performance of previous quarters, 300,000 with four deals totalling around 300,000 sq m. 200,000 100,000 The two most notable transactions of the quarter by surface area volume were 0 signed in Barajas with >100,000 sq m and 2016 2017 2018 2019 2020 2021 in Alovera with >60,000 sq m. Source Savills Aguirre Newman

3 Spotlight Logistics Market Q3 2020

The shortage of availability limits the increase in take-up. However, the 120,000 sq m recorded in the quarter was in line with the figure reached in Q3 2019

Take-up and demand The logistics market continues to perform well, although the shortage Barcelona Logistics of available product is influencing the increase in take-up. In Q3 2020, take-up Graph 5: Take-up evolution and no. of deals by quarter in Barcelona reached 120,000 sq m, distributed across 13 deals. Q1 Q2 Q3 Q4 Nº deals (right axis) 900,000 60 In the year-on-year comparison, these figures show a slight decline in both the 800,000 take-up volume (-10%) and the number of 50 transactions (-13%). 700,000 In the accumulated year of 2020, the 320,000 sq m registered represents 600,000 40 a decrease (32%) compared with the previous year (469,000 sq m). 500,000

m 30 400,000 Despite the health crisis, the number of sq deals grew during the first nine months of the year, with 51 agreements signed, 300,000 20 accounting for a 9% y-o-y increase. 200,000 The most active sectors are logistics 10 operators that heavily rely on e-commerce 100,000 and the traditional logistics businesses related to the food, furniture and 0 0 automobile industries. 2015 2016 2017 2018 2019 2020

Source Savills Aguirre Newman The average deal size in the quarter was slightly higher (9,200 sq m) than in Q3 Graph 6: Logistics take-up by areas. Q3 2020 2019 (8,800 sq m). Take-up Nº deals (right axis) With regards to the distribution of take-up, 90,000 10 once again the first tier was the focus of interest for operators where >76,000 sq m 80,000 9 were signed. This represented 64% of the total, with nine deals transacted. The second 70,000 8 tier accounted for 13%, the third for 21% and 7 the Zona Centro for 3%. 60,000 6 50,000 Although Tier 1 continues to be the most m 5 sought after due to its location for last sq 40,000 mile delivery, the lack of suitable available 4 space (adapted to occupiers’ technical 30,000 requirements) is now leading them to 3 consider expanding to other areas, such 20,000 2 as the second and third tiers. These areas have available large plots of land where 10,000 1 huge platforms in Big Box format could be developed. 0 0 Centre 1st Tier 2nd Tier 3rd Tier In the analysis of the distribution of the number of deals by region, the Vallès Occidental accounted for almost 20% of Source Savills Aguirre Newman the take-up with five transactions. Rents month in a deal carried out in ZAL. The reduced availability in the most sought-after Other regions which stood out for their areas keeps the rent stable between €6.50 - 7.25 Current supply activity were Vallès Oriental and Baix per sq m/month in the prime area and for next- The current supply of available logistics space is Llobregat Nord with three and two deals, generation logistics warehouses. reduced to 245,000 sq m. respectively. The highest rent reached was €7.25 per sq m/ From January to September, 290,000 sq m were savills-aguirrenewman.es/research 4 Spotlight Logistics Market Q3 2020

added to the market, bringing the stock to Graph 7: Take-up and demand by zone. Q3 2020 7.9 million square metres. The new supply Take-up (%) Nº deals (right axis) incorporated during the third quarter, 35% 6 almost 215,000 sq m, has not meant an increase in the supply, as 100% of it was 30% committed. 5 25% The shortage of available product on the 4 market, together with the fact that no 20% new available space has been incorporated 3 during the quarter, continues to reduce 15% the vacancy rate to 3.1%. 2 10% The areas with the highest levels of availability are Tier 3 (111,000 sq m) and 5% 1 Zona Centro (78,000 sq m) while Tier 1 only has 15,000 sq m available 0% 0 Baix LlobregatVallès Oriental Tarragonès Vallès Barcelonès Baix Llobregat Future supply Nord Occidental Sud For the last part of the year, 128,000 sq Source Savills Aguirre Newman m is expected to enter the market, 85% of Graph 8: Future supply. which will be pre-let. Speculative Committed The new available supply pending delivery 500,000 is limited to 18,000 sq m and will be incorporated in Tier 1, specifically in 450,000 the municipality of Santa Perpètua de 400,000 Mogoda. 350,000 By 2021, >280,000 sq m is planned for 300,000 construction, 61% of which is already

m 250,000 committed. All the new available space will be in Tier 1 and distributed among the sq 200,000 municipalities of Castellbisbal (45,400 sq 150,000 m), Parets del Vallès (>27,000 sq m), Sant Esteve Sesrovires (30,000 sq m) and Gavà 100,000 (>4,000 sq m). 50,000

Land 0 In the accumulated year, the total volume 2016 2017 2018 2019 2020 2021 of space transacted nationally exceeded Source Savills Aguirre Newman 1.1 million square metres across 20 deals, of which 26% were signed in markets that are becoming increasingly important, such as , Malaga and .

In the Catalan market, almost 370,000 sq m was transacted, representing 34% of the total national volume across 10 deals. For another quarter, there continued to be a shortage in the supply of land plots ready for construction; only two deals were carried out with a volume of over 100,000 sq m.

Activity during the year was focused on Tier 1 of Vallès Occidental where 66% of the transacted space was recorded over seven deals, distributed among the municipalities of Castellbisbal, Montcada i Reixac, Cerdanyola del Vallès and Barberá del Vallès.

5 Spotlight Logistics Market Q3 2020

Impact e-commerce Everything indicates that new consumer habits will continue into 2021, and this will Investment market have a positive impact on the logistics market both in terms of take-up and number of Graph 9: Annual evolution of investment volume and no. of deals deals. Invest. Vol No. Deals (right axis) Investment market 1,800 60 The commercial investment market 1,600 recorded close to €5,500m up to November, 50 of which the logistics segment accounted 1,400 for €1,125m, representing a market share of 1,200 40 21%. The presence of the logistics product in the national commercial market has 1,000 30 been steadily growing since 2012, and the €

. 800 current level is well above the average in the historical series (barely 7%). mill 600 20 400 The current figure represents 70% of the 10 national total recorded in 2019 (nearly 200 €1,700m). However, it should be noted that a 0 0 large part of this volume was made up by the 2011 2017 2013 2012 2015 2018 2016 2019 Colonial portfolio transaction (€425m). 2014 2010 2007 2020 2008 2009 Source Savills Aguirre Newman * excludes corporate transactions, land and final user purchases In terms of geographical distribution, the Madrid market (which includes the provinces Likewise, it is essential to incorporate new of the online business, where both the occupier’s bordering on Castilla-La Mancha in Corredor consumers across all areas of activity with storage activity and the lease period of the contract (>10 del Henares and the South Zone), accounts and distribution needs. In this regard, the expansion years while the usual practice is 3+2) make up the for 54% of the total number of deals. In of the logistics network of retail and logistics difference in price. 2020, the Catalonia market’s presence has operators must be aligned with the implementation decreased (only 14%) in favour of secondary of effective supply chains. Secondary product also continues the downward locations. trend of the previous quarter, standing at 6%. Yields The imbalance between supply and demand will In recent years, the three provinces of the After the adjustment of 15 basis points recorded in maintain pressure on yields. Basque Country, Valencia and Castellón in Q2, prime yields remain stable at 4.85%. the Region of Valencia, in However, the market has recorded yields below this and Zaragoza in Aragon have been on the level in warehouses rented to the main operator radar of both domestic and foreign investors, indicating their steady consolidation in the Table 1: Main investment deals 2020 national market. Less prominently, some transactions appear in destinations further from the centre of the country, such as Asset Location Purchaser Vendor León, Zamora and Burgos in Castilla y León. These key locations cover the distribution of Porfolio Mercury Several locations Patrizia GreenOak products in the northwest quadrant of the peninsula. Fondo Paneuropeo Amazon Alcalá Alcalá de Henares (Madrid) Patrizia Patrizia One of the main drivers of the market is the significant growth of e-commerce. According Getafe y Torrejón de Ardoz Project herpa Real I.S. Patrizia to internal estimates, e-commerce comprised (Madrid) 5.66% of total retail sales in 2019. However, Warehouse integrated in a forecasts from the Centre of Retail Research Tarancón (Cuenca) Investment Property Ares Management European Portfolio indicate that this figure will reach 9.9% in 2020, an acceleration of about three or four years based on the growth rate recorded until Portfolio Valdemoro (Madrid) Patrizia Logistik Services 2019.

Warehouse Redur (Madrid) Barings Real Estate Redur During the months of strict lockdown, e-commerce grew in certain areas of activity. The challenge will be to convert Logistics Platform Meco (Madrid) DWS Real Estate ICC one-time customers into regular consumers, consolidating their habits of buying online. Source Savills Aguirre Newman savills-aguirrenewman.es/research 6 Savills Aguirre Newman Research accurate information on the current situation in each of the sectors, helping them make the right decisions at each moment.

Logistics Antonio Montero Aitor Álvarez Gloria Valverde Logistics Spain Logistics Madrid Logistics Barcelona +34 91 319 13 14 +34 91 319 13 14 +34 93 439 54 54 [email protected] [email protected] [email protected]

Research Gema de la Fuente Pelayo Barroso Vanessa Ávila Research Research Research +34 91 319 13 14 +34 91 319 13 14 +34 91 319 13 14 [email protected] [email protected] [email protected]

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