When core logistics stops being core

Why Europe’s next generation of core assets will be created through transformation, not greenfield expansion, write Pascal Metschel and Mustafa Kösebay.

Not every core logistics asset will remain core. For more than a decade, core logistics real estate in Europe was treated as a relatively homogeneous asset class. Institutional capital flowed into large-scale distribution centres positioned along global supply chains – close to seaports, motorway intersections and transcontinental transport corridors. The investment case was underpinned by expanding global trade, yield compression and long-term leases to multinational occupiers.

That paradigm is now changing. Geopolitical fragmentation, trade tensions and recurring supply chain disruptions are reshaping the logic of industrial production and distribution. Corporates are no longer optimising purely for cost efficiency but increasingly for resilience. Instead of a single global network, multiple regional supply systems are emerging across regions such as Europe, North America and Asia. Production, storage and distribution are moving closer to consumption.

As a result, demand is shifting. Smaller, flexible and urban-proximate logistics buildings increasingly support “just-in-case” inventory strategies, higher stock buffers and faster delivery cycles. Total occupancy costs – including transport, labour availability and reliability – are becoming more important than nominal rent levels. This has direct implications for real estate values: the core logistics asset of the past is not necessarily the core asset of the future.

A stock under pressure

Europe’s logistics real estate stock is therefore entering a decisive phase. In Germany alone, around 200 million square metres of functional logistics space are currently in operation. A significant share of this stock was designed for global throughput rather than decentralised regional distribution. As supply chains reorganise, parts of this inventory face growing functional obsolescence – not necessarily due to physical deterioration, but due to mismatches in location, layout and operational flexibility.

Simultaneously, demand is concentrating in metropolitan regions where proximity to consumers justifies higher rents through lower transport costs and improved service levels. Yet precisely these locations offer limited availability of undeveloped land. What remains are former industrial sites – often with existing infrastructure and prior commercial use. Accessing the next generation of core assets therefore increasingly requires transformation rather than expansion.

The search for an edge

Developers and investors in Europe are operating under structural constraints. Construction costs remain high, while occupiers’ ability to absorb further rental increases is limited. At the same time, municipalities show declining willingness to designate new large-scale logistics zones, citing land scarcity, infrastructure capacity and political resistance. As a result, accessing well-located sites has become a competitive differentiator rather than a routine development step.

Brownfield sites – former industrial locations suitable for redevelopment – align well with emerging occupier demand. They are often embedded in established transport networks, located near urban centres and compatible with modern Grade A logistics standards. Redevelopment can shorten planning timelines, reduce embodied carbon compared to new greenfield construction and respond to tightening ESG requirements.

However, brownfield projects also introduce uncertainty. Future capex, permitting procedures, remediation requirements and achievable technical standards are often difficult to underwrite. Historically, this lack of transparency – rather than remediation cost alone – has constrained institutional capital. Improving data quality and standardisation is therefore a critical enabler for scaling redevelopment.

Data and expertise as enablers

In Germany, several market initiatives supported by Drees & Sommer are contributing to the professionalisation of brownfield redevelopment and improving market transparency.

One example is the national brownfield identification register developed by the German Brownfield Union. Using AI-supported site identification and consolidated geospatial datasets, the register provides a continuously updated overview of brownfield locations across the country. For investors and developers, this transforms site sourcing from an opportunistic search into a more systematic and scalable process.

Another practical challenge lies in determining which upgrade measures meaningfully enhance asset performance without inflating complexity or costs. To provide practical guidance, an industry study  conducted by LOGIX, a German logistics real estate initiative, is currently analysing existing logistics properties. A broad range of measures has been tested across several standing assets and evaluated in terms of both cost impact and effectiveness against defined sustainability standards. The resulting guidance is intended to equip property companies with a practical tool to identify the most economically viable measures from a wide range of possible interventions.

For municipalities, redevelopment offers an additional advantage. Reusing industrial land enables job creation without additional land consumption, reduces traffic distances and aligns logistics with broader regeneration strategies.

Policy frameworks are beginning to adapt accordingly. In the Netherlands, the Environment and Planning Act, effective since 2024, consolidates regulations on building, environmental impact and noise into a more integrated approval process, facilitating brownfield redevelopment while maintaining high ESG standards. Cities such as Lyon, Turin and Rotterdam are also prioritising industrial land transformation as part of wider sustainability and urban renewal agendas.

From expansion to repositioning

European logistics real estate is transitioning from an expansion cycle to a repositioning cycle. Competitive advantage will no longer be defined primarily by delivering new space, but by identifying, repositioning and upgrading existing assets in structurally resilient locations.

In our view, a large share of the next generation of core logistics assets will primarily be created through the transformation of existing industrial sites rather than new greenfield development. For institutional investors, this shift represents both risk and opportunity. Portfolios heavily exposed to legacy distribution corridors may require strategic reassessment, while early movers in urban-industrial redevelopment can secure long-term resilience. Those who combine redevelopment expertise, robust data and transparent decision frameworks will be best positioned to define what “core” means in the next cycle.

Pascal Metschel is segment lead for
asset class logistics at Drees & Sommer
and a member of the LOGIX advisory board.

Mustafa Kösebay is an associate partner at
Drees & Sommer and serves on the executive
board of the German Brownfield Union