‘2020 will be the year of e-commerce’
E-commerce has become the biggest driver of growth in the Logistics sector, experts agreed at Real Asset Media’s European Logistics: e-commerce, supply chains and investment locations briefing, which took place online this week.
‘E-commerce has moved from niche to mainstream,’ said Jean-Luc Saporito, Chief Development Officer, P3 Logistic Parks. ‘The momentum was already there, but Covid-19 has accelerated this trend by five years, increasing internet adoption and smart working but also online shopping. I predict 2020 will be the year of e-commerce’.
In the long weeks of lockdown European customers have been forced to buy online, some for the first time.
During the period of restrictive measures ‘every day was Black Friday for Amazon and grocery retailers,’ said Logan Smith, Managing Director, Aevitas Property Partners. ‘Retailers have said that the war is over and Amazon won’.
Success brings its own problems, from inventory management to staff availability to supply chain issues, but the point is that for many consumers there will be no going back to old habits.
‘For us it has been like Christmas for two months running,’ said Raimund Paetzmann,Vice President Corporate Real Estate, Zalando. ‘Obviously people will rush to the shops once they re-open, but online shopping will continue at high levels’.
A snap poll conducted among delegates shows that 53% believe e-commerce penetration will remain high after the crisis and grow further, while 46% think that levels will drop back from current levels but remain higher than before the pandemic. Only 1% believe the market will return to pre-crisis levels.
‘Online sales are now 30% of the total but there is no doubt that e-commerce is set to grow further,’ said Ben Segelman, Head of Capital Markets UK&I and MLEMEA, DHL Supply Chain. ‘The epidemic has shown the extent to which people rely on online shopping’.
E-commerce has a lot of room to grow in Europe: across the Continent 63% of consumers buy online, with a peak of 87% in the UK at one end, along with Denmark at 84%, and a low of 23% in Romania, just below Italy at 38 per cent.
‘In Italy 62% of people are still not buying online, so there is huge potential given the size of the economy’, said Anita Simaza, Head of Logistics & Industrial, Europe Europe Capital Markets , BNP Paribas Real Estate.
The country is an example of the acceleration caused by the epidemic. ‘Italy has seen a 300% growth in online sales during the lockdown,’ said Saporito.
Across Europe, ‘Logistics is seen as a resilient sector and the fall in volumes is expected to be less than that experienced by other asset types,’ said Simaza. ‘There is a lot of demand and supply is the problem, as there are far more people looking to buy than people willing to sell’.
Many speculative developments have been put on hold recently because of the crisis, exacerbating the lack of supply in many markets.
The year started on a high: investment in the sector reached €8.8 billion in Q1 2020, an increase of 22% on the previous year and the highest recorded figure of the last fifteen years.
Logistics prime rents increased by 3.9% in Q1 compared to the same period in 2019. They vary from a high of over €90/m2 in Norway and the UK, where Birmingham saw increases of 8% and London of 4%, to a low of below €50/m2 in Bucharest, Marseille and Lisbon.
Rents had been edging up in the last few years because of lack of land supply and lack of speculative developments.
‘Now the Covid-19 crisis is tempering rental growth for prime products, but lack of availability will prevent a decrease,’ said Simaza. ‘We expect a plateau this year but in some city locations demand for industrial space is so high that we will see quite high rental growth’.