Prologis Research: Europe’s €500bn Logistics Market Faces €150bn Supply Gap as Barriers Mount

• Demand for modern logistics space continues to rise, but new development is constrained
• The Netherlands illustrates how grid congestion, nitrogen policy and public opposition are slowing development

AMSTERDAM, 30 September 2025 – Europe’s €500 billion logistics real estate market faces a structural supply gap of more than €150 billion, according to a new Prologis Research white paper, Persistent Supply Constraints Position Europe For Value Growth.

Regulatory hurdles, infrastructure bottlenecks, environmental requirements and political resistance are constraining new development across Europe. At the same time, demand for modern logistics space continues to grow, fuelled by e-commerce, supply chain resilience strategies and expanding urban populations. Meeting this demand is becoming increasingly difficult as barriers mount.

Eight Years and €150 Billion to Close the Gap

Europe’s Modern Logistics Concentration (MLC) index, which tracks logistics space relative to households, stands at 30 compared with 75 in the U.S. Because Europe’s cities are denser and networks more efficient, a perfect comparison is misleading; a benchmark closer to 50 is more realistic - still implying a major shortfall.

“Even if Europe were to reach a more balanced level of logistics space, the shortfall would remain significant. At today’s pace of construction, closing the gap would take around eight years and require more than €150 billion of investment,” said Eva van der Pluijm-Kok, vice president, Prologis Europe Research.

Urban Scarcity Drives Rental Growth

Development in urban locations faces the greatest challenges, pushing logistics construction further from cities — even though demand is strongest in urban markets. This is reflected in performance, with facilities close to consumers yielding higher rental growth. “City” and “Last Touch” sites have delivered rent growth of 150 to 240 basis points above the European average over the past three years. Quality matters too, with modern facilities commanding around a 9% rent premium in markets where occupiers have a choice.

While vacancy rates have risen, modern stock remains scarce. Supply of high-quality, well-located facilities is being kept close to frictional levels by structural barriers, and occupiers consistently prioritise sustainable modern buildings in prime corridors. This dynamic is already supporting rental growth and is likely to drive continued outperformance of modern assets over the long term.

The Netherlands: Grid Congestion, Nitrogen Policy and “Boxification”

The Netherlands has become one of the most challenging markets in Europe for logistics development. This is particularly evident in the Randstad, but also in the south of the country. Space is scarce, and electricity supply is under pressure. There are many challenges. Gina Helmold, Head of Capital Deployment & Leasing Benelux at Prologis observes the same. “Grid congestion is severe, while the nitrogen crisis is limiting the granting of permits. On top of that, public resistance to new distribution centres – often labelled as ‘boxification’ of the landscape – has further intensified political pressure. Permitting procedures have become more complex and time-consuming, discouraging new applications.”

Well-Located Facilities Retain Value

“Scarcity in European logistics real estate is structural, not cyclical,” said Ben Bannatyne, President, Prologis Europe. “For customers, access to modern, sustainable space in the right locations is more critical than ever. For investors, it reinforces the long-term value of well-located facilities, where scarcity continues to drive performance. At Prologis, our scale, strong networks and executional capabilities allow us to deliver where others struggle - ensuring durable, long-term returns for our stakeholders.”

Read the full whitepaper Persistent Supply Constraints Position Europe for Value Growth on prologis.com