Germany is one of Europe's most difficult logistics markets for new developments
September 25, 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.
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.
Germany: Europe’s Permitting Bottleneck
Germany is one of the hardest logistics markets in Europe for new development. Land scarcity near major demand centres is acute, and supply is further restricted by strict forest protection laws, and complex municipal approvals. These barriers have slowed the delivery of new facilities, especially close to consumers.
Local resistance adds further pressure, with communities questioning the long-term economic value of logistics compared with alternative land uses. This combination of regulatory constraints and social opposition has reinforced structural undersupply in Germany, limiting new development despite resilient occupier demand.
“The structural scarcity in sought-after locations in Germany presents logistics real estate developers with the challenge of providing customers with the modern and sustainable space they urgently need close to consumers,” says Philipp Feige, vice president, head of capital deployment and co-managing director for Germany at Prologis. “This not only puts pressure on supply security, but also on Germany’s competitiveness as a business location.”
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.
“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.”
The complete whitepaper is available here.