Research– Q4 2020

SPOTLIGHT Savills Research Logistics Market Spotlight Logistics Market Q4 2020

Economic overview

The Spanish economy ended return to positive rates from Q2 last pre-pandemic figures will not 2020 with a year-on-year decline 2021 onwards. be seen until 2024, although slow of 11%, as a result of the enormous recovery will begin from Q2 2021 impact of the health crisis on the Regarding the labour market, job onwards. economy. Despite the sharp fall, creation contracted by 5.45% in the actual figure outperformed Q4 2020 (average -7.5% in 2020). Meanwhile, e-commerce growth the forecasts of various national The unemployment rate in Q4 continues to register a notable and international organisations by remained stable compared to Q3 slowdown. During the first half of several tenths of a percentage but grew by more than two the year 2020, the number of point. percentage points compared to deals grew by 14% y-o-y (31% in H1 the same period of the previous 2019 and 29% on average over the The start of the vaccination plan year. Furthermore, the number of last five years) and by 6% in terms at the end of 2020 offers an unemployed actively looking for of turnover (25% in H1 2019 and optimistic outlook for the work registered in SEPE (State over the last five years). These immediate future, and the agility Public Employment Service) levels contrast with the significant of the vaccination plan and the offices in January was close to growth in retail categories (which containment of new variants will four million (710,500 more people are more likely to require storage be decisive in gradually gaining a than the previous year). space). Online turnover in food, certain level of normality. fashion, home, electronics, etc. Due to COVID’s significant impact grew 36% y-o-y in H1 2020 (21% in The projections for the coming on the labour market, recovery of H1 2019 and 23% on average in the quarters mark the economy’s employment levels similar to the last five years).

Graph 1: Main economic indicators GDP Unemployment Rate (right axis) 5% 30% 25% 0% 20% -5% 15% 10% -10% 5% Annual Growth Annual -15% 0% 2011 2017 2013 2012 2015 2018 2016 2019 2014 2001 2010 2007 2003 2002 2020 2005 2008 2006 2009 2004 2000 Source Savills Aguirre Newman

Graph 2: E-commerce: online sales - yoy growth - 1H E-commerce Retail Sectors E-commerce 40%

30%

20%

10%

0% 2017 2015 2018 2016 2019 2020

Source Savills Aguirre Newman savills-aguirrenewman.es/research 2 Spotlight Logistics Market Q4 2020

Take-up in 2020 performed excellently, the more than 920,000 sq m ranks second in the historical series, just 2% off the peak recorded in 2018 (>936,000 sq m)

Madrid Logistics

Take-up and demand Graph 3: Take-up evolution and no. of deals by quarter in The significant growth in e-commerce Q1 Q2 Q3 Q4 Nº deals (right axis) in certain sectors (including food, retail and pharmaceuticals, among others) has 1,000,000 90 resulted in a dramatic increase in activity 900,000 80 in the logistics sector, making 2020 the 800,000 second best year for take-up after 2018. 70 700,000 60 The extraordinary annual take-up volume, 600,000 >920,000 sq m distributed across 57 deals, 50 represented a rise of 70% compared to the m 500,000 40

542,000 sq m signed in 2019, distributed sq 400,000 across 50 transactions. It is worth noting 30 300,000 the high number of deals closed above 25,000 sq m throughout the year, 10 in 200,000 20 total, accounting for a large part of the 100,000 10 volume signed (61%). 0 0 The >270,000 sq m signed across 20 2015 2016 2017 2018 2019 2020 transactions in Q4 2020 represents a Source Savills Aguirre Newman strong performance of take-up for the quarter. This figure almost triples the Graph 4: Logistics take-up by areas 2020 take-up registered in Q4 2019 (>103,000 sq m spread over eight deals). Take-up Nº deals (right axis) 500,000 40

Among the operators linked to e-commerce 450,000 35 that have shown the greatest presence in 400,000 the logistics market, Amazon and XPO 30 stood out. The take-up recorded between 350,000

the two accounted for 44% of the year’s m 300,000 25 total across 10 deals. sq 250,000 20 Regarding the distribution of take-up and 200,000 demand activity by zone for the entire 15 year, Corredor del Henares made up 50% 150,000 10 (>456,000 sq m) across 35 transactions, 100,000 with the South Zone accounting for 48% 5 (>442,000 sq m) across 20 deals. The 50,000 remaining 2% was distributed between the 0 0 A-3 Axis and the West Zone, with 1% and Corredor del Henares Zona Sur Eje A-3 Zona norte one transaction in each zone. Source Savills Aguirre Newman

In Q4 2020, Corredor del Henares accounted for the lion’s share of the take The four most significant transactions in Q4 The average deal size in 2020 increased up, with 59% (160,000 sq m) across 12 2020 in terms of take-up volume were all above significantly to 16,176 sq m compared to 2019 transactions; the South Zone, with 37% 25,000 sq m: two in the third tier of the South (10,839 sq m), due to the aforementioned (>100,000 sq m) across seven transactions; Zone in the municipality of Illescas (>29,000 sq megadeals. and the West Zone taking the remaining m and >37,000 sq m), and the other two in the 4% in one transaction. first and third tier of Corredor del Henares in the Rents municipalities of Torrejón de Ardoz (>29,000 sq The prime rent for logistics warehouses in the best Among the largest deals of the year, three m) and Torija (27,000 sq m). locations continues to stand at levels of €5.50 per stood out, accounting for 37% of total take- sq m/month. up. Two of these were signed in the third When looking at the distribution of the number tier of the South Zone in the municipality of deals by municipality at year-end, it is worth The highest rents, above €6.00 per sq /month, were of Illescas, with almost 270,000 sq m, and noting which had nine registered in singular assets allocated for cross- the third was signed in the second tier of transactions, and the towns of and Alcalá docking or in turnkey projects in very specific Corredor del Henares, with >75,000 sq m. de Henares, with eight and six deals, respectively. locations.

3 Spotlight Logistics Market Q4 2020

Current supply Graph 5: Take-up and demand by municipality 2020 Throughout 2020, around 870,000 sq m of Take-up (%) Nº deals (right axis) new space was incorporated into the market, 40% 10 increasing the stock to 11.5 million square 35% 9 metres. 8 30% 7 Of the new supply added to the market, 70% 25% 6 (>605,000 sq m) was available. This large volume of new supply ready for immediate 20% 5 occupancy puts the available surface area at 15% 4 3 1.2 million square metres and the vacancy rate 10% at 10.5%. 2 5% 1 Corredor del Henares accounts for 57% 0% 0 (>690,000 sq m) of the total available supply. The municipalities that make up the majority of this available space include San Fernando de Henares, Alcalá de Henares, Meco, Alovera, Marchamalo and Cabanillas del Campo. Source Savills Aguirre Newman In the South Zone, >425,000 sq m is available, representing 35% of the total supply. Most Graph 6: Future supply of the available supply is located in the Speculative Committed municipalities of Getafe, Illescas, Ontígola 1,400,000 and Borox. 1,200,000 The remaining 100,000 sq m of vacant space is spread across several municipalities in the 1,000,000 North Zone, such as , and San Agustín de Guadalix.

m 800,000

Future supply sq Over the course of 2021, just over 1.25 million 600,000 square metres is expected to be added to the market, of which 45% is already committed 400,000 (almost 565,000 sq m). 200,000 This figure is very positive considering we still have much of the year ahead, with plenty 0 of opportunity for the >700,000 sq m of 2016 2017 2018 2019 2020 2021 available space to be taken up. Source Savills Aguirre Newman

However, this figure serves only as a guideline The most significant activity was observed in the first tier, where nearly 150,000 sq m was transacted because, as usual, some projects will be across seven deals. delayed in delivery or in some cases the owners will postpone the start of project The three largest transactions in the quarter in terms of space were closed in the areas of Barajas construction. (>100,000 sq m), (>68,000 sq m) and Alovera (>60,000 sq m).

As for the distribution by tier of the new available supply in 2021 (almost 700,000 sq m), 20% will be incorporated in the first tier of Corredor del Henares and 30% in the third tier of the South Zone.

Land For yet another year, the positive performance of the land market demonstrates the continued interest from investors, developers and operators. In the Madrid market, the space transacted amounted to approximately 560,000 sq m, distributed over 18 transactions. savills-aguirrenewman.es/research 4 Spotlight Logistics Market Q4 2020

The strong demand placed the number of deals at an all-time high (70 transactions)

Take-up and demand During 2020, the take-up volume remained at healthy levels, exceeding 430,000 sq m Logistics distributed across 70 transactions. Graph 7: Take-up evolution and no. of deals by quarter in Barcelona Although take-up showed a 28% decrease compared to 2019, it is worth noting that Q1 Q2 Q3 Q4 Nº deals (right axis) there was a 15% increase in the number of 900,000 80 deals. This figure reflected the dynamic activity of the Catalan logistics market, 800,000 representing the highest in the historical 70 series. 700,000 60 Take-up recorded in Q4 2020 stood at over 111,000 sq m distributed across 19 deals, a 600,000 50 very positive figure despite the context of the health crisis that began in March 2020. 500,000

m 40 400,000 In the year-on-year comparison for Q4, take- sq up fell by 11%, although in the overall number 30 of transactions, six more were signed. 300,000 20 As for the geographical distribution during 200,000 2020, the first tier accounted for the largest 10 share (55%), followed by Zona Centro (22%). 100,000 The remaining take-up was found between the second tier (17%) and the third tier (7%). 0 0 2015 2016 2017 2018 2019 2020 With regards to the activity shown by regions, Source Savills Aguirre Newman the most noteworthy, both in terms of take- up volume and number of deals, were Vallès Graph 8: Logistics take-up by areas 2020 Oriental (>105,000 sq m across 18 deals), Vallès Occidental (79,000 sq m across 15 Take-up Nº deals (right axis) deals) and Baix Llobregat Sud (>68,000 sq m 300,000 45 across 14 deals). The performance of demand in these three regions during the year was 40 outstanding, accounting for 59% of total take- 250,000 up and 67% of the number of transactions. 35

Among the largest deals of the year, four of 200,000 30 more than 20,000 sq m stand out: Lidl in Sant 25 Esteve Sesrovires (>28,500 sq m), Amazon in m 150,000

Montcada i Reixac (>20,000 sq m), as well as sq 20 >20,000 sq m in Vilarodona and 25,000 sq m in Canonja. 100,000 15

In the year-on-year comparison, the average 10 deal size decreased by 37%, standing at 6,169 50,000 sq m in 2020 down from 9,861 sq m in 2019. 5

Rents 0 0 Centre 1st Tier 2nd Tier 3rd Tier The rent for next-generation logistics warehouses in the prime zone remains stable between €6.50-7.25 per sq m/month. Source Savills Aguirre Newman The highest rent reached in the last quarter, space was added to the market, increasing the stock to market, there is an unsatisfied demand, as the existing €7.50 per sq m/month, was identified in a 8.4 million square metres. product does not meet their needs. warehouse of >11,000 sq m in El Prat de Llobregat. The current limited supply available, just over Regarding the geographical distribution of available 285,000 sq m, places the vacancy rate at 3.4%. space, the third tier accumulates 42% between the Current supply municipalities of Bràfim, El Pla de Santa María, La During 2020, around 415,000 sq m of new Given the shortage of supply in the Catalan logistics Bisbal del Penedès and Valls. Meanwhile, Zona Centro

5 Spotlight Logistics Market Q4 2020

has 25%, spread across the municipalities of Graph 9: Logistics take-up by zones 2020 Barcelona, El Prat de Llobregat and Hospitalet de Llobregat. Finally, the remaining 31% is Take-up (%) Nº deals (right axis) concentrated in the first and second tier, with 30% 20 15% and 16%, respectively. 18 With respect to the regions with the highest 25% availability, the most notable are Alt Camp 16 (35%), Barcelonès (13%) and Baix Llobregat 14 Sud (12%). 20% 12 Future Supply 15% 10 During 2021, it is expected that 405,000 sq m will be incorporated into the market, of which 8 62% (250,000 sq m) is already committed. 10% 6 The shortage of available space, which does 4 not meet the needs of demand, has led to this 5% high volume of pre-let space. 2 0% 0 Of the total supply of new available space to enter the market during the year, around 155,000 sq m, more than 85% will be in the first tier, distributed among the municipalities of Castellbisbal, Parets del Source Savills Aguirre Newman Vallès, Sant Esteve Sesrovires, Granollers, Liça d’Amunt and Gavà. Graph 10: Future supply

Land Speculative Committed Of the total volume transacted nationwide 500,000 (1.5 million sq m), 43% was signed in the Catalan market, 37% in Zona Centro (Madrid 450,000 and Castilla la Mancha) and the remaining 20% in markets such as , , 400,000 and Malaga. 350,000

The scarcity of product in the Catalan market 300,000 that meets the needs of demand continues to pique interest in the land market. This is m 250,000 reflected in the volume of space transacted sq during 2020, which exceeded 600,000 sq m 200,000 distributed over 15 transactions compared to seven in 2019. 150,000 100,000 Activity was mainly located in the first tier, where 66% of the signed surface area 50,000 (>420,000 sq m) was concentrated. The municipalities of Castellbisbal and Barberà 0 del Vallès showed the highest activity with 2016 2017 2018 2019 2020 2021 three and two transactions, respectively. Source Savills Aguirre Newman

savills-aguirrenewman.es/research 6 Spotlight Logistics Market Q4 2020

Investmentmt market The logistics segment continues to gain significance in the commercial investment Investment market market. In 2020, the nearly €1,520m recorded represented just over 22% of the Graph 11: Annual evolution of investment volume and no. of deals total investment market, far below the historical average of 7%. Invest. Vol No. Deals (right axis)

Since 2012, the share of the logistics real 1,800 70 estate market has grown steadily (4.43% in 1,600 2012), and everything points to investors 60 maintaining their focus on storage assets. 1,400 50 The limitations imposed on trade as a result 1,200 of the health crisis significantly accelerated the development of e-commerce, leading to 1,000 40 increased logistics space requirements for € warehousing and distribution. . 800 30

According to estimates by Savills Aguirre mill 600 Newman, based on the total retail figure 20 and the latest data published by the CNMC 400 on e-commerce (Q2 2020), the Centre of 10 200 Retail Research predicted the share of e-commerce to reach 7.6% in 2020, with the 0 0 capacity to grow to 9.9%. 2011 2017 2013 2012 2015 2018 2016 2019 2014 2010 2007 2020 2008 The growth of online activity is 2009 unstoppable and is one of the main drivers Source Savills Aguirre Newman * excludes corporate transactions, land and final user purchases of the logistics market today.

The main obstacle in the market will be In 2020, the logistics market ranked second with took place in Madrid, each of them divestments the shortage of product. The year-on-year 19%, behind the supermarket and hypermarket by Patrizia. Moreover, a fund managed by Patrizia comparison of investment volume recorded sector, which accounted for 61%. acquired the warehouse leased to Amazon in Alcalá a decline of 8%, which does not reflect the de Henares, which had been acquired earlier in high level of active demand. Despite the The Madrid market (which includes the bordering the year by Patrizia as part of BentallGreenOak’s decline, logistics was the segment with the provinces of Castilla-La Mancha) continues to Mercury portfolio. Meanwhile, Real IS acquired the smallest downturn, excluding retail, which account for a large part of the activity, in 2020 Sherpa portfolio, comprising of two warehouses in grew by 37%. This can be attributed to the representing just over 50% of the total. Catalonia, the first tier of Madrid (one of them also occupied >€700m concentrated in the sale of Intu’s the second most important market, with Barcelona by Amazon). two assets in Zaragoza and (which at the forefront, significantly decreased its accounted for almost 40% of the total presence, accumulating just 15%, compared to 27% Yields annual volume). in the last five years. The imbalance of supply and demand kept pressure on yield levels. Prime product recorded a 10-basis One of the alternatives to alleviate the Retailers and logistics operators have the need point compression to 4.75%. Secondary assets shortage of available assets would be sale to bring their distribution points closer to other also registered an adjustment of 25 basis points to and leaseback transactions. Therefore, at large population centres, which would alleviate the 5.75%. a time of rising capital values, operators lack of product in these areas, as well as appeal to who occupy their own warehouses will have the interest of investors in secondary locations. It should also be noted that the market has seen access to capital. This will allow them to Valencia and Seville, the third and fourth yields below the prime level in facilities leased to make investments focused on digitising largest provinces in terms of population, have the main e-commerce operator, where both the processes and improving their business long been on the radar of investors in search of occupier’s activity and the duration of the contract strategies, with the aim of reducing opportunities, as has Zaragoza, situated on the A2 (>10 years, whereas the usual practice is 3+2) result costs and gaining market share in their motorway linking the two main markets (Madrid in the price difference. respective sectors. and Barcelona).

During 2020, sale and leaseback However, other locations are gradually emerging transactions accounted for 14%, similar to that are more focused on local logistics, such as the average of the last five years. However, Álava and Guipúzcoa in the Basque Country, while a notable difference came from the real Vizcaya continues to grow and consolidate, as well estate segments, where most activity was as León, Zamora and Burgos in Castilla y León. focused. The largest deals of the quarter, both of >€100m,

7 Savills Aguirre Newman Research We carry out a thorough and objective analysis of the real estate market in order to provide our clients with 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]

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