Spain 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 Madrid 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 San Fernando de Henares with five transactions, reservations, car rentals, etc.), Amazon, one of the most prominent e-commerce while the towns of Getafe 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 Barcelona 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.