Logistics occupiers across Europe are cutting costs but there is still demand for the best quality space as tenants look to operate more cheaply and efficiently in modern buildings, according to CB Richard Ellis’s latest report.

Demand is down for space and occupiers are increasingly looking to rationalize, restructure leases and sub-let excess space, CBRE’s latest Industrial and Logistics MarketView report found.

However, some are also looking to upgrade to better buildings that will improve their business operating efficiency – leading to a two-tier market in places such as Germany, where demand generally is weakening but rents for new build-to-suit space are rising, partly as a result of demand but also as a result of rising yields and the difficulty of financing development.

Guy Frampton, head of Europe, the Middle East and Africa industrial and logistics at CBRE said: ‘Occupiers of industrial and logistics space are looking for flexible, adaptable buildings which will help to drive efficiencies and reduce operating costs.

'A two-tier market has emerged in some European markets as rents begin to rise for tailor-made facilities, despite an overall rental rate downturn on existing buildings last year.’

Some sectors are still very active, including food, household consumer products and data storage, said Frampton. These requirements are better suited to purpose built facilities, he said, however this is proving a difficult ask for some developers.

Frampton said: ‘Rising yields have put upward pressure on rents and downward pressure on land values. The challenge for the occupier is to find developers with the ability to carry out large-scale development in multiple markets, in order both to take advantage of such cyclical demand as exists now, and secure premises that will serve their business needs over the medium to longer term.’