The logistics warehousing segment saw robust expansion in 2020 and 2021, driven by the surge in e commerce and a broader push toward online shopping. Investors were willing to accept lower yields on these assets because the return profile remained attractive in the face of growth, even as risk moved higher in other areas of the market.
As inflation climbed and central banks tightened monetary policy, the appeal of these assets shifted. With government bond yields moving past 3.5 percent in the United States, the calculus for acquisitions in Spain and similar markets changed, and many funds revisited expected returns. From March 2022 onward, the average return required by investors rose by roughly one to one and a half percentage points, according to EY’s Logistics Property Telescope, prepared by EY with global reach and local implications.
This shift in required returns directly affects asset valuations. For example, a one million euro chartered ship once bought low and sold high, but today assets trade at a smaller premium and prices adjust accordingly. The lesson from EY’s study is clear: uncertainty, capital availability, and debt levels push investors onto the defensive, reshaping pricing and strategy across markets.
A problem with empty ships
EY estimates around three million square meters of currently vacant logistics space are unlet in the market, underscoring a mismatch between supply and demand. Spain, for instance, has positioned itself as a pivotal logistics hub within Europe, though the absence of broad demand remains a factor. As noted by Javier García-Mateo, partner at EY for Strategy and Operations, the country stands out for now but is not immune to regional demand shifts. In southern Europe, warehouse demand has not kept pace with supply, prompting cautious optimism about activity in the coming months.
Looking ahead to 2023, EY reports three million square meters of new warehouse space entering the market, described by partners as solid data amid ongoing uncertainty. The reasoning is that major operators must expand their inventories and surface areas to cushion potential supply chain disruptions. Luis Lázaro, manager of commercial and logistics assets at Merlin Properties, commented that sustaining historic contracting levels will be challenging, yet the market fundamentals remain favorable and Spain still trails its European peers in some metrics.
Beyond the three million square meters of vacancies, another 14 to 16 million square feet are slated for launch, though EY voices doubt about the pace and certainty of these projects under current conditions. The risk profile for developers and backers remains elevated, with financing and feasibility under scrutiny across the pipeline.
Logistics investment
Investment in logistics warehousing is projected to reach roughly 1.5 billion euros in 2023, down from about 3 billion euros the prior year. Javier García-Mateo notes a potential 50 percent year-over-year decline, urging a cautious interpretation of trends while acknowledging underlying supply chain resilience. Spain accounted for about five percent of Europe’s total logistics transaction volume in 2022, highlighting its growing role in the regional market.
The market for land suitable for new warehouse construction may slow if prices do not adjust. EY suggests that price corrections could occur through 2023, as new projects face the hurdle of attracting buyers when land values wobble. In the United States, adjustments tailored to the current market environment are already evident, with the country representing a sizable share of global logistics transactions and continuing to shape appetite and pricing dynamics.
Globally, the logistics sector has seen a consolidation trend where private equity and venture capital sellers increasingly retire capital to long-term holders. Whereas a few years ago large players owned a minority of the fleet, current data shows a growing concentration among a small number of major firms. The European market appears to be moving at a different pace from the United States and Canada, where scale and access to capital continue to influence deal structure and strategy.
The broader picture indicates a maturing market: capital is being deployed with greater selectivity, but the fundamentals remain positive for logistics real estate. Market participants in North America and Europe are watching supply chains closely, seeking to balance proximity to demand with operational efficiency and risk management. The shift toward higher-quality assets, better exposure management, and smarter land-use planning is evident across borders as developers, investors, and tenants recalibrate expectations in light of evolving macro conditions.