Spain Research– Q2 2020 SPOTLIGHT Savills Research Logistics Market Spotlight Logistics Market Q2 2020 The take-up recorded in the first half of the year surpassed 227,000 sq m, a particularly strong performance that exceeded the figure for the same period in 2019 by 39% Economic overview The significant slowdown in the Madrid Logistics global economy caused by the COVID-19 pandemic at the beginning of 2020 was reflected Graph 1: Take-up evolution and no. of deals by quarter in Madrid by the negative growth of the Spanish economy during the first Q1 Q2 Q3 Q4 Nº deals (right axis) two quarters of the year. 1,000,000 90 According to the latest data published by INE, the GDP for Q2 900,000 80 stood at -22.1% y-o-y. The 800,000 forecasts announced by Focus 70 Economics show the figures to be 700,000 negative until Q1 2021 and the 60 projection stands at -10.4% by the 600,000 end of 2020. 50 m 500,000 sq 40 The Consumer Confidence Index 400,000 for the month of July stood at 30 53.1 points (latest data published 300,000 by CIS). This figure represents a 20 fall in the year-on-year rate of 200,000 21.2% (the lowest level in the last 100,000 10 six years). The global crisis caused by COVID-19 has 0 0 considerably affected this index 2015 2016 2017 2018 2019 2020 and the uncertainty in the phase of the new normal will continue to Source Savills Aguirre Newman influence the valuation of Take-up and demand The two transactions that stood out in the quarter consumer expectations. The level of demand during the second quarter in terms of take-up volume were found in Tier 3 of the year remained positive, with the take-up of Corredor del Henares, in the municipalities of The labour market underwent a volume reaching 98,000 sq m distributed over Alovera and Yunquera de Henares with >27,000 sq recession from the beginning of 10 transactions. In the quarterly year-on-year m and >13,000 sq m, respectively. 2020 that will continue until the comparison, take-up grew by 9% compared to 2019. end of the year and in 2021, The distribution in the number of transactions according to forecasts from The accumulated take-up volume for the first half per municipality has been very homogeneous, Focus Economics. The number of of the year exceeded 227,000 sq m, a very positive highlighting the towns of Alovera, Coslada and people registered with Social figure considering that it represents an increase of Leganés with two deals each, while the rest of the Security at the end of July stood 39% compared to H1 2019. In terms of number of towns registered only one deal each. at 18.6 million, representing a deals, 20 agreements were signed compared to 23 3.2% y-o-y decrease. The in H1 2019. The average deal size in H1 2020 slightly increased unemployment rate increased to (11,384 sq m) compared to H1 2019 (7,125 sq m). It 15.3% in Q2 (the latest data from As can be seen in the half-yearly data previously is worth highlighting that in Q1 2020 a deal was the Encuesta de Población mentioned, despite the economic situation the signed in the municipality of Alcalá de Henares Activa). country is facing due to COVID-19, the logistics with a size of over 75,000 sq m, which had a sector is one of the most resilient. significant influence on this increase. E-commerce again registered very positive figures in the last With regards to the distribution of activity by Rents zones, Corredor del Henares once again accounted The prime rent for logistics warehouses in the quarter of 2019. According to the for the lion’s share with 78% (>76,000 sq m) and best locations continues to stand at levels of €5.50 latest data from the National seven transactions, while the remaining 22% per sq m /month, while the rents in the rest of the Commission for Markets and (>21,000 sq m) was carried out in the South Zone areas remain the same. Competition (CNMC), the volume across three deals. transacted in Q4 showed a 24% The highest rent, at around €6.00 per sq m/month, y-o-y growth and 25% in the In the accumulated semester, it is important to was signed in a transaction in the municipality number of transactions. In 2019, note the outstanding performance of Corredor del of San Fernando de Henares for a warehouse the turnover in Spain exceeded Henares, where a great part of the take-up took designated for cross-docking. €48.8m, reflecting a 25% y-o-y place. 180,000 sq m was transacted over 13 deals increase. compared with the South Zone which had 34,000 Current supply sq m across six transactions. During the first half of the year, almost 470,000 sq m savills-aguirrenewman.es/research 2 Spotlight Logistics Market Q2 2020 of new space was incorporated into the Graph 2: Logistics take-up by areas. Q2 2020 market, increasing the stock to 11 million Take-up Nº deals (right axis) sq m. 90,000 8 Of the almost 470,000 sq m of new space, 80,000 7 around 240,000 sq m is available for immediate occupancy. The incorporation 70,000 6 of this new space has increased 60,000 availability to 1,000,000 sq m and places 5 the vacancy rate at 9.6%. 50,000 m 4 40,000 61% of the newly incorporated available sq 3 supply is concentrated in the South Zone 30,000 (>240,000 sq m) and is distributed among 2 the municipalities of Getafe (13%), Illescas 20,000 (28%) and Villaverde (19%). 10,000 1 Future supply 0 0 For the second half of the year, it is Corredor del Henares Zona Sur expected that 568,000 sq m of new surface Source Savills Aguirre Newman area will be incorporated, 10% of which has already been occupied. Graph 3: Take-up and demand by zone. Q2 2020 Take-up (%) Nº deals (right axis) Most of the available space to be delivered (80%) will be incorporated in Tier 3. This 40% 3 space is distributed, on the one hand, 35% between the municipalities of Cabanillas 30% del Campo, Torija and Marchamalo, 2 located in the Corredor del Henares 25% and, on the other hand, between the 20% municipalities of Illescas, Ontígola and 15% Seseña in the South Zone. 1 10% It is estimated that during 2021 around 700,000 sq m of new space will be added 5% to the stock. However, this figure serves 0% 0 only as a reference because, as usual, some Alovera Coslada Yunquera Valdemoro Alcalá Leganés S.F. de projects will be delayed in their delivery de Henares Henares or in some cases the owners will postpone the start of project construction. Source Savills Aguirre Newman Land In the first half of the year, only two Graph 4: Future supply deals were recorded in the land market, Speculative Committed totalling 15,000 sq m. This figure is a 1,200,000 significant decline compared to the same period of last year. However, interest 1,000,000 remains at very high levels from both investors and developers who continue to be very active, although this has not been 800,000 reflected in transactions closed during the first half of the year. 600,000 m sq 400,000 200,000 0 2016 2017 2018 2019 2020 2021 Source Savills Aguirre Newman 3 Spotlight Logistics Market Q2 2020 Quarter characterised by numerous small- and medium-sized volume transactions, an indication that the logistics market continues to take-up new spaces with long-term contracts Take-up and demand The take-up of logistics space in the second quarter of the year was 92,000 sq Barcelona Logistics m distributed across 18 deals. In the year- on-year comparison of take-up, the figure Graph 5: Take-up evolution and no. of deals by quarter in Barcelona for Q2 showed a drop of 15%. Q1 Q2 Q3 Q4 Nº deals (right axis) Moreover, the number of deals was similar 900,000 70 to that recorded in the same period of last year. 800,000 60 In the second quarter the Vallès Oriental region stood out, where the largest volume 700,000 of take-up was concentrated (>33,000 sq m), 50 as well as having the greatest activity with six 600,000 agreements. 500,000 40 The average deal size in the quarter was m 400,000 5,109 sq m, 20% below the 6,387 sq m sq 30 registered in Q2 2019. It is worth noting that of the 18 agreements signed during 300,000 20 the quarter, only one had a surface area of more than 10,000 sq m. 200,000 10 In the first half of the year, just over 100,000 200,000 sq m of space was taken up, distributed across 38 deals, compared 0 0 to 336,000 sq m in H1 2019 across 32 2015 2016 2017 2018 2019 2020 transactions. Source Savills Aguirre Newman Although the data in the half-yearly Graph 6: Logistics take-up by areas. Q2 2020 comparison seem to show a less positive performance in H1 2020, reflecting a 40% Take-up Nº deals (right axis) decline, this is misleading as two large 45,000 12 transactions were closed during the first half of 2019, totalling 139,000 sq m and 40,000 representing an outstanding take-up.