5 reasons the European logistics real estate investment market will benefit from growing e-commerce

Over the last two weeks my working days have been filled with conversations related to our latest white paper A new logistics real estate landscape – The impact of multi-channel retail on logistics. In particular developers and investors are keen to explore the opportunities – and understand the challenges – that arise with the evolution of e-commerce in the logistics real estate sector.

The five main reasons the European logistics real estate investment market will benefit from growing e-commerce:

  1. The modern customer is driving the future of supply chains with information such as prices, quality and availability of products only a click away. The shift in logistics behind these evolving supply chains is becoming the backbone in delivering the best multi-channel customer service. As a result, logistics real estate will become increasingly attractive to a wider range of investors.
  2. Occupier requirements for large fulfilment centres are now more prevalent in the mature markets – a trend that is not only driven by the pure online giants such as Amazon or Zalando (the German fashion e-tailer). Requirements are coming also from other retailers or 3PLs who are currently re-organising their supply chains to respond to an increase in e-commerce related contracts. The latest evidence arrives with news of the ground-breaking delivery of a 175,000 sq m logistics centre in Erfurt (Germany) for German bookseller KNV. The centre will be able to service around one quarter of the whole German market for KNV and will employ around one thousand permanent employees.  As online sales and multi-channel retailing is gathering pace and the pressure of short delivery times is increasing, requirements for logistics mega-centres will continue to grow.
  3. Occupier demand is also significantly intensifying for parcel hubs and cross dock centres. These buildings facilitate the throughflow of parcels at close proximity to large urban areas, ports and airports. As such they have a high strategic importance in the e-commerce supply chain. These centres are smaller in size than e-fulfilment centres, generally between 10,000-20,000 sq m – thus providing an investment size that is appealing to investors.
  4. Parcel hubs and sortation centres do not only provide a crucial support in online delivery they also benefit from the growing importance in city/urban logistics – another phenomenon currently driving floorspace demand for these facilities.
  5. Changing building requirements and location strategies are driving development activity for this new type of building. This in turn is leading to increasing liquidity in the wider logistics real estate market.

Although occupier demand for dedicated e-commerce logistics space is still relatively small, rising online-sales will drive significant change in future logistics space requirements. It will be this change that will provide savvy developers and investors in logistics assets with plenty of new opportunities.