European logistics demand resilient despite trade tariffs

AEW's latest research suggests that diverse demand for European logistics space provides resilience against trade tariffs.

Hans Vrensen, head of Research & Strategy Europe at AEW

While tariffs create supply chain pressures, encouraging a shift from "just-in-time" to "just-in-case" inventory strategies, the impact on core Europe is expected to be limited.
Ireland, Switzerland, Central and Eastern Europe, and the Nordic countries are expected to be more susceptible, according to the Oxford Economics’ global industry tariff vulnerability index.
E-commerce remains a key driver, but demand is broad-based across various sectors.
Slower economic growth, weaker demand, and higher vacancy rates have led to a lower forecast of 1.9% annual rental growth for prime European logistics markets between 2025 and 2029. However, with new supply moderating, the average European vacancy rate is projected to decrease from 5.1% at the end of 2024 to 3.7% by 2029.
Like other sectors, higher interest rates increased prime logistics yields from 3.7% to 5.3%. Following repricing and revised projections, yields are expected to compress by only 0.3% by 2029.
Consequently, European logistics markets are projected to deliver annual total returns of 7.9% between 2025 and 2029, making it the second most attractive sector after offices. CEE and UK logistics markets are expected to outperform, with projected annual returns of 10.9% and 10.4%, respectively.
Investor sentiment towards the logistics sector has generally improved since 2022, despite a recent pause. Investment volumes are projected to reach €50 bn in 2025, a 19% increase from 2024. Logistics' 23% share of total cross-sector investment volume in 2024 was the highest on record.
Hans Vrensen, head of Research & Strategy Europe at AEW, commented: “Our current belief is therefore that Europe’s core logistics markets have limited vulnerability to US trade tariffs and that there is even a strong likelihood that the tariff uncertainty may trigger an increased demand for European logistics space, as we saw during Covid. The diversified base of logistics space users should offer solid resilience in terms of future take-up, albeit with rental growth moderating in line with slower economic activity in the short term due to the tariff uncertainty. We do not expect any major inward yield shift in the sector, meaning rental growth and active asset management will be the key drivers for investor returns.”