The sector has delivered strong growth and attracted huge investments, and now thanks to e-commerce rental growth is finally coming to Europe
The European logistics market will soon play catch-up with the US and the UK and this change will bring rental growth to the sector, delegates heard at the PropertyEU E-commerce and Logistics Investment Briefing at Expo Real in October.
‘Logistics is now recognized as a core pillar of economic growth,’ said Vanessa Muscarà, associate director – property research at M&G Real Estate. ‘Despite strong fundamentals and record low vacancy rates, rentals uplifts have been minimal so far, but this is about to change and the change is imminent.’
The logistics sector is now poised for change, said Dirk Sosef, head of European research & strategy, Prologis: ‘It has strong market fundamentals but depressed rents, so there clearly is an opportunity now. As the cycle continues, rental growth will be stronger.’
Strong demand and scarcity of product will push rents higher, said Tim Davies, head of EMEA industrial and logistics agency, Colliers International: ‘The supply and demand dynamics will come into play. Lack of supply will drive rental growth across Europe.’
The fundamentals have changed now that logistics is in demand and competing with all other asset classes. ‘The availability of land and workers has changed the dynamics,’ said Thorsten Kiel, head of logistics Europe, TH Real Estate. ‘The combination of e-commerce, which is a growing and sustainable trend, and the pricing which is reflecting this trend is positive for investors. Logistics provides good diversification for investors anyway, but we like the prospect of rental growth coming through now. ’
The fundamentals have changed now that logistics is in demand and competing with all other asset classes. ‘The availability of land and workers has changed the dynamics,’ said Thorsten Kiel, head of logistics Europe, TH Real Estate. ‘The combination of e-commerce, which is a growing and sustainable trend, and the pricing which is reflecting this trend is positive for investors. Logistics provides good diversification for investors anyway, but we like the prospect of rental growth coming through now. ’
Five years ago e-commerce was 5% of logistics, now it accounts for 20% and we expect the market to grow further and faster,’ said Sosef.
In the UK 25% of all shopping is done online, but by 2024 that percentage will grow to 50%, with significant implications for the retail sector and for property in general. In the US there are 3,000 shopping centres, said Davies, but the expectation is that their number will shrink to 1,000 because of e-commerce, throwing up all sorts of opportunities for redevelopment and alternative use of obsolete malls as logistics hubs.
‘It would be a big change, because logistics now always loses out to retail because they are prepared to pay a lot more for land,’ said Christian Bischoff, CEO, LLI-Projects. However, there are a lot more shopping centres in the US than in Europe, so there is no such potential obsolescence here for the time being.
