Knight Frank: households key demand driver for logistics
An additional 30 million sq m of industrial and logistics space could be required across Europe over the next five years, with household growth a key demand driver, according to new research from Knight Frank.
There are fundamental shifts taking place across the European logistics landscape, set for a significant transformation as rising household numbers and evolving consumer behaviours drive demand for additional logistics space, the study finds.
“With the demand for warehouse and distribution space continuing to grow, investors and occupiers need to adapt to evolving market dynamics,” said Richard Laird, co-head of capital markets, Knight Frank Europe. “The intersection of demographic trends, urbanisation, and ecommerce, as well as shifting dynamics for trade and manufacturing, will be key to unlocking opportunities and shaping future investment strategies.”
Analysis of the UK market shows that each household requires approximately 10.1 sq m of industrial and logistics floorspace, a trend that is increasingly relevant across European markets as urbanisation, ecommerce expansion, and shifting trade routes reshape supply chains. As European cities continue to expand, this trend is expected to accelerate, with last-mile facilities in urban areas becoming an increasingly critical part of distribution networks.
Ecommerce continues to reshape Europe’s logistics sector. Online retail requires three times more warehouse space than traditional store-based retail, and Knight Frank’s research forecasts the growth in online sales across Europe’s top five online retail markets will need an additional 10.2 million sq m of fulfilment and delivery hubs by 2027.
However, logistics networks are also evolving—retailers are increasingly adopting micro-fulfilment centres and hybrid distribution models to enhance efficiency and reduce last-mile delivery costs. This evolution may have implications for future space requirements as well as location choices.
With 76% of the EU’s population now living in urban areas—a figure expected to rise to 80% by 2050—demand for urban logistics space is intensifying. The expansion of low-emission zones in cities such as Paris, London, and Barcelona is further influencing logistics strategies, prompting operators to adopt electric fleets, cargo bikes, and urban micro-hubs to meet sustainability goals.
Beyond ecommerce and household growth, rising defence spending is set to boost demand for industrial and logistics space across Europe. Several European nations are increasing their defence budgets, which will drive expansion in high-tech manufacturing sectors, including aerospace and electronics. Both Germany and France have significant defence manufacturing sectors, and rising defence spending will boost demand, particularly in existing manufacturing hubs.
As Europe’s population continues to grow and household sizes shrink, the demand for logistics space will evolve in both scale and complexity. Businesses must adapt to shifting consumption patterns, the rise of automation, and new trade routes to remain competitive. With household growth emerging as a crucial metric for logistics planning, understanding these changes will be essential for investors, occupiers, and developers shaping the future of Europe’s industrial and logistics landscape, Knight Frank says.
