Logistics thrives despite 2022’s diminished ‘Amazon factor’

After several years of being pushed to new heights by a range of “tailwinds” the logistics sector is experiencing a number of “headwinds” now.

“One of the things I think about most is the strength of the tail winds compared with the strength of the headwinds,” said Trammell Crow Company head of UK logistics, director Mike Forster.

“I am a strong believer that the tailwinds are stronger and much longer lasting than the headwinds that we’re seeing, but we have to be so very mindful in everything we do about what those headwinds are,” he said speaking after Real Asset Media’s European Logistics Investment Briefing, staged earlier this week.

In particular, Forster said it is important to be aware of the effect of inflation and rising construction costs on property fundamentals.

This may be offset by tailwinds such as the significant lack of supply and still record demand and the effect that will have on rental growth.

“We talk about ‘the Amazon factor’ and for many years we’ve been talking about what would happen if Amazon were not the prevalent taker of space  – they’ve been  taking 30%+ of the logistics space over the last few years. They have taken a breather this year, and they only represent 3% of the take-up but we’re quite pleased because that hole has been filled by other occupiers and other 3PLs etc,” he added.

He said that the other key takeaway is on build costs which he said spiked 20% over the last year. “We’re still seeing difficulties in that market in terms of the availability of materials and labour, but for tenders we’re doing lately we’re seeing the actual rise in build cost is starting to abate. So there could be some light at the end of the tunnel.”

Forster said the current record inflation is set to subside within two to three years. “You’ve got to remember, we’re building buildings for the next 15-20 years and occupiers are looking for space for many years.”

And he emphasised that the 2% vacancy rate is very important because it indicates that there is a need for speculative product to meet still record demand.

Click on the video to watch the full interview or listen to the podcast below.