Strong Rental Growth Continues Amid Historically Low Vacancies

The Prologis Logistics Rent Index examines trends in net effective rents globally in 60 markets spanning the four major regions of the world. This unique index focuses on market-taking rents (net of concessions) for modern-grade logistics real estate, covering pricing for Class-A and well-located Class-B facilities. Data for the Prologis Rent Index comes from our global portfolio and our local knowledge of pricing in the markets in which we operate.

Key Takeaways from our 2016 Rental Survey
Moderate recovery in Europe continued. Rents were up 3 percent, led by the UK, and a broader swath of markets began to see increased rates. The United States led market rental growth in 2016, rising 5 percent. Globally, rents rose 4 percent.

Top Five Increases in Market Rent in 2016, Europe
1.    Budapest
2.    Barcelona
3.    Prague
4.    London/South East UK
5.    Midlands

Net effective rental growth was 3 percent last year across Europe, a repeat of 2015’s pace. Rental growth remains moderate compared to the U.S. but is notably ahead of the low-inflationary environment. The unwinding of lease concessions has been the principal driver of the market rental recovery.

The operating environment for logistics real estate experienced a measured, albeit steady, improvement during the last several years. In turn, the market vacancy rate in Europe is below 6 percent, the lowest level on record. While market demand has been positive, it has been constrained by the measured economic recovery. Broadly, net effective rents remain below prior cycle peaks, and the pace of market rental growth in Europe might surpass the U.S. over the next few years.

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