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Favourable market dynamics are expected to help logistics real estate remain a compelling area for investment.

Our market is characterised by strong occupier demand, limited supply of available space and high barriers to developing new assets in prime logistics locations in Continental Europe. These favourable market dynamics are supporting rental growth and improvements in lease terms, with vacancy rates remaining low.

Global events such as the Covid pandemic and recent heightened geopolitical risk have accelerated demand in the short term. Over the longer-term, demand is being driven by three underlying factors:

1. Growth of e-commerce:

Warehouse space is fundamental to both successfully fulfilling e-commerce sales and doing so at a cost that allows companies to operate profitably. Companies typically require large, flexible, modern and well-located properties to deliver orders and manage returns rapidly and efficiently.

2. Creating resilient supply chains:

Companies are reinforcing their supply chains to ensure their efficiency and resilience to external shocks. Measures used to do this include adopting the latest supply chain planning tools; reviewing manufacturing locations and transportation networks; and holding more critical stock closer to customers and end-users.

3. Drive towards more sustainable real estate and operations:

Companies are looking towards their logistics real estate to help meet their ESG objectives. In addition to reducing their environmental impacts, occupiers want a workspace that promotes employee wellbeing to help them attract and retain staff. Meanwhile, decarbonising transportation has driven increased demand for features such as providing EV charging points. We believe these trends will continue to favour the modern, high-quality and well-located buildings we own.

The availability of logistics space in many prime sub-markets continues to be limited, and the barriers to developing new warehouses in attractive locations remain high.  Barriers to development supply include: (1) Availability of land, (2) Difficulty securing planning consents and (3) Increased finance and construction costs.

The 2023 European Real Estate Logistics Census (conducted by supply chain market analysts Analytiqa for Tritax EuroBox and Savills) shows healthy occupier demand for industrial and logistics real estate despite a tough macro-environment.

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