Logistics occupiers cautious but still looking for more space

Logistics occupiers are concerned about the short term but they are still looking for more space, delegates heard at Real Asset Media’s Trends 2022: The European Logistics Real Estate Census 2022 briefing, that took place this week at Savills’ headquarters in London and online on the REALX.Global platform.

Mark Bornick, Director of Research, Analytiqa

“Long-term optimism about the outlook for the sector is tempered by caution over the immediate horizon,” said Mark Bornick, director of research, Analytiqa, presenting the results of their European Property Census 2022. “Yet 90% of respondents say they want the same or more warehouse space over the next three years.”

The second edition of research into the attitudes and confidence of property professionals across Europe shows that most people (51%) find current trading conditions more difficult or much more difficult.

The key concerns for investors and occupiers are rising rents, while for asset managers, agents and consultants the main problem is lack of supply of new buildings. Landowners worry about power supplies, while developers fret about zoning and permits. Everyone is concerned about the availability of labour, economic uncertainty and consumer price issues.

“Price sensitivity has increased and costs are the top concerns for manufacturers and retailers,” said Bornick. “But the feature that is top rated in terms of importance is flexible lease length, which was third on the list last year and has gone up to number one. Contract terms are a worry for occupiers.”

Somewhat surprisingly, given the growing focus on ESG, sustainability features, including green energy, are only ranked at number six in the priority list, below labour availability, car parking for employees and the ability to support automation services. “Sustainability really should be the top priority for everyone now,” said Bornick.  

When looking for warehouse space, occupiers see Germany and France as top destinations, followed by Poland and Italy. Portugal, while coming off a low base, has seen a strong increase in demand.

“Urban logistics is a sought-after segment, with demand driven by logistics company delivery networks”, said Bornick. “Mid-box spaces between 10,000 and 40,000 sq m are stable, but there is less demand for mega-boxes.”

The evolution of supply chains is driving demand for more space, closer to home markets. 

“The main lesson learnt from Covid is the need to reduce reliance on foreign imported materials and goods and shorten the supply chain,” said Bornick. “Most occupiers are increasing the quantity of stock they hold and are diversifying their supplier base as well as investing in automation.”