As both businesses and governments in Western European rethink supply chains following the disruption caused by the Covid-19 pandemic, Eastern Europe could be one of the main beneficiaries.
Logistics real estate has clearly demonstrated that it is one of the more resilient property sectors in recent months. But, while the sentiment indicators repeatedly show that logistics has weathered the Covid-19 storm better than, for example, the retail sector, a number of challenges lie ahead according to Tobias Kassner, head of research at Garbe Industrial Real Estate.
Interviewed by Richard Betts of Real Asset Media, Kassner said that although logistics has not yet burdened by rent deferrals, a number of client sectors that have been seriously affected by the pandemic and this may filter through to logistics landlords.
Also, supply chains have proved that they are not as robust as had previously been assumed. Shortages that occurred when international borders were closed during the pandemic are prompting governments and producers to re-examine stocking practices such as just-in-time delivery. No longer is it a case of ‘the less stock the better’, particularly in the medicine and pharmaceutical sectors.
And although there have been calls to repatriate production from other regions such as Asia, Kassner says that it should be borne in mind that these processes are offshore because of the lower production costs which that provided.
However, in the processes of re-shoring or near-shoring, eastern Europe could provide a solution because of the lower employee costs that prevail there, Kassner says.