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´No bubble in logistics´ as sector´s rise set to continue

The direction of travel for the logistics sector is up and up, delegates heard at Real Asset Media´s presentation of the first European Logistics Real Estate Census, conducted by Savills, Tritax Eurobox and Analytiqa.

Nick Preston.

¨The results of the survey reinforce what we have seen in the market and the key point is the long-term nature of this change,¨ said Nick Preston, fund manager, Tritax Eurobox. ¨There´s been a structural change in the way companies think about logistics and supply chain issues have been brought to the forefront.¨

The survey´s over 400 respondents, which included investors, developers and occupiers, agree that it´s a story of structural, long term growth that shows no sign of slowing down.

¨The word bubble really doesn´t apply in this case,¨ said Marcus de Minckwitz, head of EMEA industrial & logistics, Savills. ¨The sector has seen intense interest and huge amounts of money being deployed, but it’s still an exciting market to get into today.”

The UK market, which is the most developed in Europe, points the way. 

¨In the UK, ten years after we started, we are still seeing growth and that shows what will happen in Europe,” said de Minckwitz. ¨We believe in the structural growth story. The word that applies in this case is conviction.¨

The census does not only give an up to date snapshot of the sector and show the level of conviction among players, but it also provides accurate information and data to help investors form a successful strategy.

No quick fix available for supply shortages

It has to be a long-term strategy, said Kristof Verstraeten, founder, managing director, Logistics Capital Partners: ¨We have ten years of increasing demand ahead. The main problem with the sector, which is lack of supply, will not be solved in a few years.¨

As e-commerce boomed during the pandemic, some in the sector were concerned that the volumes would not be sustained as the health emergency receded. But their fears were dispelled by the evidence of continued and sustainable growth.

¨The market is taking a long-term view and we´re already working on projects for 2024/25¨, said Charles Pease, head of real estate Europe, GXO Logistics. ¨The challenge is securing land and getting the building permits. We are seeing spec developments which are snapped up pretty quickly.¨

There are shortages of space already in most European countries, and they are set to become acute next year, he said: ¨There is almost nothing left in the UK and very little in Europe, especially in the logistics hot spots.¨

There is no possible immediate fix to the supply problem, given that land is scarce, permitting lead times are longer and building is more complex. But there are several solutions that can be explored.

¨As rental growth comes through, it can unlock brownfields, which used to be too expensive but now can be redeveloped,¨ said Verstraeten. ¨We can also go vertical, adding cubic metres to the same plot of land, as they have already done in Hong Kong, Korea and Japan.¨