A positive domino effect is taking place in Continental Europe, as one country after another experiences a surge in demand for warehousing and logistics space and transforms its retail sector into ‘true multi-channel markets’, according to Savills research released today.
The flip side of this trend is the disruption that retailers face in servicing e-commerce demand and the difficulties in finding suitable warehouse space and guaranteeing fast deliveries. Only technology, innovation and creative thinking will provide solutions, such as multi-storey green warehouses, to the new problems being created.
Kevin Mofid, head of industrial research at Savills, calls it the ‘tipping point’: when 11% of all retail sales attributed to e-commerce sales, the retail sector is transformed and a boom in warehouse take-up is triggered.
‘11% is the magic number where e-commerce sales go from something retailers can largely manage as part of their traditional retail operations to a force that transforms the entire business’.
France, the Netherlands and Sweden will be the next countries in Europe to hit the tipping point, he predicts: ‘The UK and Germany are already well past the tipping point, at 21.4% and 15.1% respectively, and facing challenges in facing e-commerce demand. France is now at 10%, while the Netherlands and Sweden are at 9.5%’.
These countries have already seen large increases in the volumes of warehouse space taken in the last twelve months, and a corresponding fall in vacancy rates. In Sweden, just to give an idea, the vacancy rate for prime logistics space is below 3%.
If, as it is likely, France, the Netherlands and Sweden continue to follow the pattern set by the UK, they will experience a further surge in demand for warehouse space.
They can look at the UK capital to get a sense of what is coming, Mofid says: ‘As the biggest city in the most advanced e-commerce market in Europe, London has seen vacancy rates on warehouse space within the city centre drop to just 2.5% and top rents surge to £30 per sq ft as retailers compete for very limited space’.
This trend ‘is now echoed in Germany and France, the Netherlands and Sweden are set to follow shortly,’ he said. ‘Competition for warehouse space will surge across European centres as markets hit the tipping point but, as we are seeing in London, lack of supply, high rents, pollution and congestion are all problems that must be addressed by technology and innovation’.
As Impacts, Savills’ global research programme, explains, solutions are already being found. The ‘Paris AIR2 Logistique’ at Port de Gennevilliers, France’s largest river port, should help meet the nation’s growing taste for ecommerce; this two-storeyed warehouse is environmentally friendly and allows distribution of goods via the River Seine and rail to minimise traffic movements.
‘If others adopt similar solutions and look to address the issues upfront before they hit the 11% tipping point, it will be much easier than trying to solve them in hindsight, as London has found,” Mofid says.