Key drivers of logistics real estate in 2014

As everybody is slowly returning to the office and 2013 full-year numbers are being finalized focus is firmly on 2014 already. So what’s in store for logistics real estate markets this year?

Across the globe, supply chains are being dramatically altered by the change taking place both in retail markets and manufacturing processes; cost hikes in transportation and salaries; the evolution of emerging markets; the implementation or further development of new technologies; and the need to respond to environmental pressures.

In 2014, drivers of change impacting on supply chains will continue to evolve at a dizzying pace, and along with more well-established drivers, will lead to a further rapid re-configuration of distribution networks. As a result, we foresee continued high demand for logistics real estate solutions.

Based on our latest research into the sector personally I expect the following trends to lead further growing network re-configuration in 2014:

  • As omni-channel is emerging to be the most crucial future success factor for retail companies, retailers and their logistics service partners are further aligning to this new reality. Therefore, development of mega e-fulfilment centres will continue apace and parcel networks in and around cities will continue to evolve.
  • The growing click-and-collect segment will lead to a rapid development of pick-up points across larger and, going forward, smaller cities. As this will include a growing online food segment, click-and-collect must increasingly provide multi-temperature distribution solutions.
  • Both of the above will require the implementation of smart urban logistics solutions that are able to cope with a growing flow of online orders either picked up by customers or delivered to their home.
  • Climate change will increasingly impact on supply chain strategies and real estate location decisions. In the past, extreme weather events have typically occurred in regions most exposed to natural disasters such as hurricanes, flooding and earthquakes.  However, more recently, such events are increasingly taking place across a wider geographical area. More frequently adverse weather conditions across Europe – normally a moderate climate zone – is highlighting growing threats of supply chain disruption. This in turn will require a more attentive location strategy and the inclusion of adverse weather protection measures in logistics facilities.

These drivers are not exhaustive. They will however be those that require continued immediate real estate action in order for companies to remain competitive. Many others, including new innovative production processes such as 3D printing, changing maritime transport patterns and cost pressure leading to increased focus on location-based strategies, growing customer demand for greener supply chains along with economic growth in the developing world, also hold a significant potential to alter global supply chains. However, their impact will be felt only in the longer term.