Technological innovation and changing customer demands are creating challenges for the logistics sector, but the key problem is more down to earth. Land availability is the biggest issue, experts agreed at Real Asset Media’s Future of Logistics Real Estate investment briefing, which was held in Munich in June.
‘Land is the biggest driver’, said Buddy Roes, COO & Northern Europe MD, Logicor. ‘We feel comfortable because we own 621 logistics buildings, 14 mln m2 in 17 countries in Europe’.
High demand and shortage of supply is leading to zero vacancy rates and a rise in speculative development.
‘After the financial crisis there was a very low rate of speculative schemes but now they are increasing again because given the demand it’s a no-brainer,’ said Ingo Steves, MD, Gazeley North Europe. ‘We are pure developers, it’s in our DNA, and now it’s the right time in the cycle to harvest returns, but you need land and you need capital, especially in Northern Europe’.
Land prices are increasing, especially in high-demand areas like Northern Germany, the Netherlands and the UK.
‘Land values are getting close to, or even improving, on residential values,’ said Andy Harding, Head of Industrial & Logistics, JLL UK.
The shortage of land is leading to innovation, which does not have to be high-tech. It can also mean resourcefulness and finding creative solutions to new problems, like the demand for last-mile delivery in overcrowded city centres.
‘In London now e-tailers are looking at all sorts of weird and wonderful ways to be able to get goods to the customer in as short a time as possible,’ said Harding. ‘They are looking at basement carparks, ten floors underground, redundant office buildings or retail units’.
The high street in the UK has suffered, he said, so shops are being re-purposed as delivery centres. ‘There are lots of places that are not your standard warehouse and they are right in the middle of the city,’ he said.
It is not all about e-commerce and parcel delivery, Harding said: ‘It is not just the e-tailers who are fighting for space: there is F&B, hospitality, construction, self-storage and so on. There is a lot of competition for these buildings’.
‘I realised some years ago that retail was no longer going to be the future but warehouses were the future,’ said Roes. ‘That’s when I switched from retail to logistics and I’ve never regretted it’.
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