Online event: ‘A good time for spec development’

Lower costs and the anticipation of higher demand make this a good time for spec development, delegates heard at Real Asset Media’s European Logistics Investment Briefing this week, an online event attended by 300 participants from 27 different countries.

‘Spec development is something we are doing because we strongly believe in it,’ said Ingo Steves, Managing Director, Gazeley North Europe. ‘It is a great time for logistics because everyone is ordering online. Buildings under construction that will be completed in Q4 are already leased’. 

Robert Dobrzycki, Chief Executive Officer, Panattoni Europe, Marcus de Minckwitz, Director, Omnichannel Group Savills, Stephan Riechers, Senior Investment Manager Logistik, Union Investment Real Estate GmbH. Ingo Steves, Managing Director, Gazeley North Europe and Kevin Mofid, Director Research, Savills (UK) discuss the current outlook for the European Logistics Real Estate Invesmtent Market. Event hosted by Real Asset Media.

Demand is one driver, and lower construction costs during this time of crisis and subdued activity provide another good reason.

‘Given what is happening to construction prices, we would be selectively pushing for spec development in some markets,’ said Robert Dobrzycki, CEO, Panattoni Europe.

‘It is not a bad bet: if you believe logistics is the right asset class you can build now at lower costs in the right location and then you are ready for when the market picks up,’ he said. ‘It could be the best deal you are likely to do for several years’. 

The growth in online shopping, which is fuelling the interest in logistics, is a trend that has been accelerated, but not created, by the crisis and it will continue after the pandemic is over and things return to normal.

‘E-commerce is the winner in this situation, if the term can be used in such an emergency,’ said Dobrzycki. ‘The shift to online is a short-term response to the crisis but it is also a long-term trend. It was clear before, it is even more obvious now that it’s growing faster than ever’.

An indication is the recent announcement by Amazon, the undisputed market leader, that it is seeking to hire an additional 75,000 workers on top of the 100,000 it has recently recruited.

Retail sales are forecast to grow by 2.5% a year between 2019 and 2024, according to Savills figures, while online penetration is predicted to grow at an average of 8.5% a year in the same period.