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Sluggish recovery of demand as development remains muted
In 2025, European logistics take-up stabilised at between 5 and 6m sq m per quarter, still well below the 9.6m sq m peak recorded in Q4 2021, but showing a slight improvement on a challenging 2024.
Net absorption is not expected to recover until 2027, despite the increase in take-up. This reflects occupiers trading up facilities and vacating those that are less efficient or not future-ready, as opposed to expanding their footprint. With most European electricity grids close to or at capacity, securing energy for increasingly power-hungry warehouses is also considered critical.
Cost-reduction pressures across the supply chain will become even more prominent, often conflicting with the desire to improve efficiency or make warehouses more resilient to disruption. Automation is one of these conflicting investments; prohibitively expensive for many logistics occupiers, but with long-term savings and operational benefits.
Vacancy rates continued to rise during 2025, despite expectations of achieving a balance between weak net absorption and declining new supply. Such an equilibrium is now anticipated in the second half of the year, when 12 month rolling completions are expected to hit a nine-year low, due to the currently muted development pipeline.
A growing share of expected completions this year will be for already-committed space. Speculative development will remain tightly controlled, even in countries traditionally more receptive to it, such as Spain and Poland.
Our baseline scenario forecasts prime rental growth to further slow during 2026 at 1.8%, with headline prime rent outperformance expected in Iberia, Dublin, and select CEE markets. Conversely, incentives are likely to continue rising, particularly in locations with more abundant supply.
Our forecast scenarios, outlined in the Economy section, are for 2.1% growth under our upside scenario, and 0.3% under our downside scenario.
Figure 5: Net completions, net absorption (rolling 12 months), and vacancy rate (%)
(United Kingdom, Germany, France, Netherlands, Spain, Italy, Belgium, Poland, Czech Republic, and Slovakia).
Trends to watch
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Market bifurcation
The gap between prime logistics assets and the wider market is likely to continue to expand, reinforcing the flight to quality. This trend will also create opportunities to reposition older but well-located properties to meet modern standards.
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Labour challenges
Labour availability and cost will remain critical challenges for logistics occupiers. In established hubs, new developments may need to draw labour from existing facilities, adding pressure to recruitment and retention strategies.
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Power supply
Securing reliable power supply will become increasingly important as electricity grids approach capacity. Self-sufficient and off-grid solutions are expected to gain traction, particularly in regions where grid limitations restrict new development.
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Competition for land
Competition for land and construction resources will intensify as logistics and data centre developers vie for prime sites and contractor services. This rivalry is likely to influence development costs and timelines across both sectors.
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Geopolitics and sustainability
Sustainability and resilience will shape strategic decisions. Geopolitical tensions and regulatory changes will drive the testing of alternative trade routes, such as Arctic shipping lanes, alongside initiatives like renewable-powered container vessels. At the same time, occupiers will shift focus from green certifications to pragmatic climate transition plans, recognising the significant capital investment required to achieve net zero targets.