Why European logistics will emerge stronger from ongoing market recalibration

 

Smart operators are adapting to transformational capital markets and shifting investor demands, says Nick Cripps.

The rulebook many assumed governed European logistics investment has been quietly rewritten over the last cycle, and the transition is far from complete. While headlines have been focused on limited transaction volumes, shifting private credit dynamics, and the absence of core capital, a more fundamental change is reshaping how value is created.

It is essential to look beyond the headline numbers. According to Savills, global logistics investment fell 10% year-on-year in Q2 2025 to USD 42.2 billion, with European fund-raising consistently underperforming targets by 60–80%. Yet this decline masks a more interesting evolution: the emergence of multiple, parallel capital ecosystems that reward thematic strategies built around megatrends and operational capabilities.

Institutional capital has not simply “dried up”. Instead, it reflects changing limited partner preferences. Many are gravitating toward separate accounts, club deals, and hybrid structures that offer greater control and alignment through vertically integrated investment vehicles

Sovereign wealth funds and large pension plans have increasingly been drawn to private credit strategies or direct equity partnerships with operating platforms in preference to blind-pool funds. At scale, this is logical, as evidenced by several large groups over the past five years. This is not capital inactivity, but rather an evolution in capital deployment.

Family offices and private wealth also represent an expanding capital pool, particularly in Europe and Asia. Knight Frank notes that private capital accounted for 45% of all CRE transactions globally in 2024. Unlike the largest institutions, private wealth can be more nimble on risk appetite and investment timelines, and in many cases can write comparably large cheques.

Most importantly, there remains strong conviction in a reindustrialising and supply constrained Europe. Major Asian and US investors are actively seeking European exposure through specialist platforms offering cross-border access and local operational expertise. This creates real opportunities for operators who have nurtured capital relationships over multiple cycles and who also understand diverse submarket idiosyncrasies.

Panattoni’s network – and its ability to respond to evolving market dynamics – allows us to see the current cycle for what it is: an extended buying opportunity, characterised by reduced competition, rational pricing, and risk balanced more evenly between upside and downside.

Capital does not evolve in isolation. A fundamental reality for logistics firms today is their growing reliance on technology integration to secure competitive advantage. From warehouse management systems and robotics to digital twins and real-time performance tools, technology adoption and AI integration have become essential to competitiveness and supply chain resilience. This is particularly critical in responding to the global disruptions reshaping how goods are produced, distributed and consumed.

This is why logistics real estate is no longer simply about “warehouses”. It is about critical logistics infrastructure on which economies and societies increasingly depend. Technology-enabled operations require sites capable of supporting advanced automation, underpinned by robust power supply, design sophistication, and future-ready infrastructure. The CBRE European Logistics Occupier Survey captures this shift clearly: as power supply has consistently emerged in recent years as a top-three selection criterion, underlining the essential role of electrical infrastructure.

For investors, this represents a clear value-creation opportunity, provided they partner with the right operators. Those who can navigate an increasingly quality-driven sector will not only capture disproportionate value in a selective market but also offset valuation drag caused by accelerating obsolescence and declining liquidity.

The London market illustrates this dynamic. Knight Frank data shows that while rental growth in London and the South East has been sharp in recent years, rising stock levels are now contributing to the first signs of headline rent declines in some submarkets. Yet superior specifications, especially in prime locations, continue to command premiums even as secondary stock comes under pressure. This bifurcation between A-grade and all other stock mirrors the experience in the office sector.

The market is clearly maturing. CBRE’s survey confirms this flight to quality: occupiers are prioritising business value creation through better facilities that drive efficiency and productivity, rather than simply pursuing the lowest-cost option.

The numbers support this trend. The proportion of occupiers reporting logistics building running costs (including rent) at more than 10% of operational expenditure has fallen for a second consecutive year, suggesting operational efficiency gains from higher-quality facilities. Some 53% of respondents said they would prioritise modern warehouses over traditional stock in all expansion plans.

We are encouraged by the broader evolution in capital partnerships, including the increasing prominence of direct capital relationships. While intermediated capital plays an important role in connecting investors and opportunities, it can at times be shaped by committee structures, allocation frameworks, and benchmarking or annual performance cycles. Direct engagement with proprietary capital, where appropriate, can offer greater predictability and a clearer alignment around long-term value creation, complementing the strengths of established intermediary models.

Many of our European joint-venture partners have a deep understanding of operational logistics. This allows for more creative structuring around specific opportunities and tenant needs, and often unlocks deeper opportunity pools as market idiosyncrasies are navigated with conviction. In a market where flexibility and deep sector expertise increasingly determine execution capability, these relationships provide genuine competitive moats.

The European data reinforces this point. According to Savills, while core and core-plus investors are cautious, favouring private credit and infrastructure strategies, allocators partnering with sector specialists continue to deploy capital. The transactions taking place are driven by operators with established capital relationships and conviction around demand, rental growth, and the structural drivers underpinning logistics.

As a sector, we should be proud of the progress made. As a company now focused on building a global investment platform for critical logistics and digital industries, the stakes are higher. Success requires cultivating multiple capital relationships across an evolving ecosystem, able to react to a diversifying pool of opportunities.

We have built a platform that can facilitate foreign direct investment across Europe. Working with capital providers from across the globe, we are helping mobilise private capital globally to invest in the infrastructure needed for 21st-century economies.

As Colliers reports, UK annual rental growth reached 5.2 per cent in the first half of 2025, supported by resilient e-commerce and third-party logistics demand.

Colliers reports UK rental growth of 5.2 per cent in the first half of 2025, driven by resilient e-commerce and 3PL demand. Rising stock levels are pressuring some submarkets, but this is sharpening the flight to quality rather than weakening fundamentals. Prime, future-ready assets continue to outperform.

For investors, this creates a clear path to value. Those aligned with operators delivering modern, power-resilient and technologically capable facilities are best positioned. While some capital remains cautious, specialist platforms continue to attract committed deployment.

Logistics has undergone a major structural shift and is emerging with a more sophisticated capital ecosystem. For Panattoni, the focus is on building a global platform for critical logistics and digital industries, supported by diversified capital relationships and strong cross-border investment capability.

The rulebook for European logistics is being rewritten. Technology, evolving capital preferences and a more selective occupier base are reshaping the sector. Operators combining scale, operational depth and long-term capital alignment will lead a market poised for sustained structural growth.