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Breadth of demand will drive Logistics growth in Europe

Demand for logistics will not slow down as the coronavirus pandemic recedes, delegates heard at Real Asset Media’s The Future of Logistics investment briefing, which took place yesterday as part of Transport Logistics online 2021.

“In the last 12 months we’ve seen an acceleration of online retail,” said Sally Bruer, partner, logistics & industrial insight and strategy, Cushman & Wakefield. “In Europe, online volume in one year has been as much as in the previous five years combined.”

Sally Bruer, Partner,
Logistics & Industrial, Cushman & Wakefield

The lockdowns were a contributing factor to the explosion of e-commerce, but there are multiple structural drivers that will determine its continued growth.

“The biggest driver of growth in the US and Europe has been the transformation of the retail landscape,” said Ben Bannatyne, president, Prologis Europe. “Covid certainly accelerated that trend but while it may slow down now, it will definitely continue apace.”

As the market grows, different logistics networks need different types of warehouses and buildings in different locations, ensuring that there is demand across the board.

“There is a need for all types and sizes of facilities, from last mile to large out-of-town warehouses,” said Robert Dobrzycki, CEO Europe, Panattoni. “But facilities close to the customer base are the most complicated to deliver.”

The urbanisation trend may have paused during the pandemic but it will resume with a vengeance. It is expected that by 2030 two thirds of people will live in cities in Europe, and that there will be 74 cities on the continent with over 1 million inhabitants.

This will further increase demand, present challenges around supply and prove costly for businesses.

Delivering space at quantity and speed required is challenging

“The sheer breadth of demand is a challenge to the supply side to deliver to market in the huge quantities and at the speed that customers demand,” Bruer said.

The level of demand is pushing rents higher across Europe, while land prices are doubling in some locations. The inevitable upshot, said Bannatyne, is that “we’re going to see capital values that we never thought possible in logistics”.

Within cities, click-and-collect will play a significant role as retailers adapt to consumer demands and re-think their space. Maximising use is likely to feature more prominently than conversions of space.

“The shopping experience is changing and it’s all about location and utilising the space better,” said Otis Spencer, CIO, P3 Logistic Parks. “There will be the shop in front and a distribution facility at the back.”