Development activity in Europe's main logistics markets is at its highest level since the downfall in 2008, driven by build-to-suit and owner-occupied developments.
More than one-third of the seven million square meters of new logistics space under construction in Europe is being built by owner-occupiers, while 55 percent of the development pipeline is already pre-let, according to a new report from Jones Lang LaSalle.
The new development strategy is contrary to the speculative development seen before 2008, when markets produced an increase in unoccupied supply.
"Speculative development amounts to about 10 percent of all development -- slightly over 700,000 square meters at the start of this quarter," JLL's Philip Marsden said in the report. "Well over half of this space -- around 400,000 square meters, is concentrated around Moscow and St. Petersburg, where vacancy rates are close to zero."
The overall net effect on supply levels remains limited, the reports states.
"Low completion volumes in combination with robust demand over the past three years have reduced readily available modern space to its lowest level over the last decade," Mr. Marsden said.
The market's owner-occupied and built-to-suit activity is driven by the need for very large facilities, including online retailers looking to expand, JLL reports. These often include mega-buildings -- 100,000 square meters or larger -- in non-core distribution locations.
Examples of these large projects currently under construction include an almost 100,000-square-meter e-fulfillment center at Nord Pas-de-Calais (France) for Amazon, and three distribution centers across Germany -- 175,000 square meters for bookseller Koch Neff Volckmar (KNV) at Erfurt; 150,000 square meters for food retailer EDEKA at Lauenau near Hanover; and 75,000 square meters for Zalando at Möcnhengladach, JLL reports.
Developers are returning to speculative development as economic growth and market sentiment improve. However, the firm doesn't expect a significant increase in supply in the short to medium term.