Prologis’ European business has reported a record take-up level of 98% at the end of its financial year.
For the full year to the end of December, the industrial specialist owned and had investments in real estate totalling 32.9m sq ft in Europe.
During Q4, the company signed 2.2m sq ft of new leases and an additional 4.1m sq ft of lease renewals.
Full-year 2018 building disposals totalled 18.8m sq ft, while land sales comprised 14.9m sq ft. These included the sale of a $1.1bn (£853m) logistics portfolio to Singapore’s Mapletree Investments.
The company’s building acquisitions for the full year totalled 1.7m sq ft, while land purchases tallied 18.3m sq ft.
At quarter-end, the company owned or had investments in properties and development projects spanning 175.5m sq ft across Europe.
During 2018, Prologis started 15 build-to-suit and 22 speculative projects with a combined total of 9.9m sq ft, of which 47.6% was prelet.
Uncertainty ahead
Ben Bannatyne, president of Prologis, Europe, told EG: “Last year was a great year across all fronts. We expect to see similar [in the year ahead], but we will be slightly more cautious in terms of how we will deploy our capital, due to the uncertainty out there, particularly in the UK.
“We are as close to 100% leased as we can be, and our operating business in the UK is in great shape – we have no major leasing events this year, in terms of lease renewals or terminations. But we are mindful of what is going on in retail and the auto industry, as well as uncertainty around Brexit.
“We are being careful and will be cautious around our speculative development programme, with a clear bias towards build-to-suit developments.”
Bannatyne added that the company had “signed a number of big transactions” since the start of the year.
He said: “There is a lot going on around e-commerce, online retailing and how that is reshaping the retail landscape in the UK.
“Clearly people are nervous, but generally the big businesses and occupiers that we are dealing with have long-term strategies in the UK. There may be a few blips but in the long term, business is looking good.”
New developments
The company started 12 new developments during Q4 in the Czech Republic, France, Italy, the Netherlands, Slovakia and the UK, totalling 3.1m sq ft. Of these, 31.1% were build-to-suit units and 68.9% were speculative developments.
Development starts in Q4 included a 535,000 sq ft speculative build at Prologis Park Dirft III in Northampton.
Bannatyne said: “Supply in the fourth quarter was healthy and in line with the strength of immediate demand which, together with continued low vacancy rates, allowed for a disciplined increase in speculative building.
“Market conditions remain very good as demand is diverse and broad-based, while supply remains disciplined.”
Rental growth
“We have seen rental growth in the UK for the past three years, and that continued last year,” he added.
“Land prices and construction costs are going up and land is becoming more scarce, so the ability to deliver new space to the market is impeded. Generally, occupiers are growing – so it really has resulted in strong rental growth; stronger than the market was expecting.”
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