Logistics

January 2026 Forecast

Moderate take-up growth, with net absorption recovery in 2027

Our projections show a continuation of the trend of moderately growing take-up this year. However, there remains a downside risk should the macroeconomic and political instability persist. Net absorption is expected to recover in 2027. 

Midyear review

• Despite the outbreak of the US-Iran conflict in February, the European leasing market surprised to the upside in the first half of the year. Across Europe’s top 10 logistics markets, take-up in H1 increased by 15% when compared with the same period in 2025. Net absorption, defined as the change in occupied stock, has remained steady so far this year, as occupiers prioritise relocations to better quality space over expanding their footprint. We maintain our view that absorption will start to recover from next year.

January 2026 Forecast

Vacancy rates to stabilise towards the back end of the year

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.

Midyear review

• Vacancy rates continued to expand in the first half of the year, though the rate of expansion is slowing. The aggregated European vacancy rate now stands at 5.6%, only marginally above the year-end 2025 level. Two major markets – Spain and Poland – have seen a year-on-year reduction in their vacancy rates this year. The sharp slowdown in speculative construction activity has contributed to this. Speculative space under construction as a proportion of existing stock now stands at just 1.3% in Europe, less than half the rate seen during the peak of the leasing market in 2022. Our forecast still points to stabilisation in the vacancy rate in the second half of the year.

January 2026 Forecast

Increased share of completions will be for pre-let space

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.

Midyear review

• As anticipated at the beginning of the year, delivery of speculative space has remained subdued. This is caused by several factors, including an unfavourable situation around inflation and interest rates, stabilising net rents and an until-recently subdued occupational market. These factors have disincentivised developers, who weigh the risk of speculative development and cut these schemes from the pipeline first. Rent levels across speculative and Build-to-Suit (BTS) developments are similar, and with higher risks and therefore greater margin expectations for speculative developments, development economics become less viable. Development financing is also harder to secure for speculative schemes. Speculative space under construction has remained low, accounting for less than 40% of total development activity.

H2 2026 Outlook

New sources of leasing demand will emerge

As Europe's economy sees structural change, and a more volatile geopolitical landscape continues to affect the continent, we expect to see a shift in the composition of leasing demand across Europe. The rise of Chinese occupiers seeking space across the continent is a key theme in this regard. Chinese automotive and e-commerce sectors are the most active, with the latter taking space indirectly via third-party logistics companies (3PLs), though they are increasingly leasing space directly.

Higher European defence spending will provide a more moderate boost to demand. The UK and EU combined are expected to increase defence spending by c. 70% over the five years to 2030. We estimate that equipment procurement will capture the largest share (c. 45%) of the incremental spending increase, and this segment is most likely to translate into demand for factories, depots, and logistics assets. Our modelling indicates additional leasing demand accessible to institutional investors of between 4m and 8m sq m over the next five years because of the increased spend.

More generally, 3PLs and post and parcel companies remain the most buoyant in their expansion intentions, with 68% and 75% of these firms, respectively, signalling near-term intentions to expand in our latest European Logistics Occupier Survey, compared with an average of 51% across all respondents. They are supported by an ongoing trend to outsource distribution by manufacturers and retailers. The US-Iran conflict has had a markedly less pronounced impact on sentiment in these segments than the 'Liberation Day' tariffs in 2025.

Conversely, certain sectors are expected to account for more moderate take-up than in prior years. While manufacturing has steadily increased its share of take-up since 2022, having accounted for almost a quarter of total European leasing in 2025, we see this segment accounting for a lower proportion of demand moving forward. In our survey, just 34% of manufacturers reported plans to expand in the near-term. They are under pressure from elevated energy costs because of the US-Iran conflict, a stronger Euro weighing on export demand, and competitive pressure from Mainland China.

As a result of increased inflation expectations this year, our European average rental forecast has risen in nominal terms. However, our expectation for real (inflation-adjusted) rental growth has fallen, given the weaker macroeconomic backdrop. There are standout markets, however. Certain German cities such as Frankfurt and Hamburg, the East Midlands region in the UK, and markets across Southern and Central and Eastern Europe are forecast to perform more strongly.

Incentives, meanwhile, look to have stabilised as of midyear. We do not anticipate further increases in rent-free periods in the second half of the year, especially given improving occupier sentiment in Q2.

Figure 7: European net absorption, net completions and vacancy rate

Automation will increasingly impact building design

The continued automation of warehousing will have an increasingly visible impact on physical building design. In our Logistics Occupier Survey, respondents cited building reasons, including the capacity to automate operations, as the number one 'pull factor' leading them to take a specific warehouse.

Floor specification, column grid spacing, and building heights will all shift to accommodate increased automation. Grid capacity and electricity demand are constraints that developers will need to factor into their decision-making, with over 80% of our respondents reporting concern around power availability and grid reliability. At present, the power landscape remains uneven, with Germany and the Netherlands seeing slow planning processes and limited capacity, while France is better positioned.

The use of AI will improve forecasting and supply chain accuracy, reducing the need for occupiers to keep safety stock. The reduction in safety stock will allow inventory to be placed closer to the consumer, with a greater emphasis placed on last-mile solutions, enabling better service levels.

Figure 8: Three-year expansion plans and share of respondents reporting expansion intentions by sector