Industrial real estate – are companies too short-term focused to build future-proof strategies?


I knew the question would come (and promptly) when I told our PR team we were ready to release results of our survey amongst major occupiers of logistics and industrial real estate across Europe. They did not disappoint. It came immediately: ‘Is there a new big trend that will make an interesting headline? Anything newsworthy that is different from what we have been talking about already?’

Well, different? Not really. But newsworthy? Certainly yes. Respondents confirmed that the trends and challenges that have impacted on supply chain strategies lately will continue to play a significant part in supply chain management over the next few years as well. In their opinion, e-commerce and multi-channel retail will remain as the main growth enabler while increasing transport costs will remain a major concern.

And let’s be clear.  A continuation of current trends is far from bad news.  In fact it means that occupational demand will remain at high levels for some time to come. Demand will be driven in particular by growing requirements for large size facilities and local parcel hubs and sortation centres to support increasing parcel delivery. Given today’s limited supply of modern logistics facilities across most European markets, this will place upwards pressure on prime rents and nurture further strong construction levels.

Despite ‘business as usual’ responses, there however remains one very intriguing paradox . Respondents failed to place high importance on a number of the trends that many experts suggest could significantly impact various segments of the logistics and industrial sector going forward. Is it the respondents or the experts that are correct? Are new technologies such as 3D printing or climate change related risks artificially heightened by a small group of specialists? Do these trends currently take centre stage in many news articles simply because they offer compelling headlines? Or could it be that respondents underrate the potential impact of these trends on their business models at their peril?

The five year horizon in our survey might have in part influenced responses here. Indeed, most trends identified as less important will have a more substantial impact on the market only in later years. Still, I do wonder whether some of these trends are likely to take off on a scale that most today do not think possible?

If this is the case it would be safe to assume that the alignment in business and real estate portfolio strategies that is currently taking place does not provide adequate mitigation against the impacts these trends would have both on the logistics and industrial sectors going forwards.

In my view those trends that may have been under-emphasised by respondents include (in no particular order of importance):

–          3D printing

–          Urban / last mile logistics

–          Transport collaboration

–          Rising supply chain risks caused by climate change

–          Aging transport infrastructure

We cannot know how fast and far these trends – and others – will develop. Yet, with creative thinking, companies will be able to transform a potential risk in an opportunity – or ignore it at their peril.