In the latest edition of the Global Logistics Outlook 2021, international real estate advisor Cushman & Wakefield analyzes the key drivers of international growth and transaction dynamics in the sector and presents expectations for the sector for the remainder of the year. Jos Hesselink, Research Lead at Cushman & Wakefield Netherlands: “2020 was a year of unprecedented disruption as a result of the COVID-19 pandemic. Consumer behavior has shifted into top gear, vulnerabilities in the global supply chain have been exposed and the adoption of technology has accelerated.”
The logistics sector in Europe is struggling with an enormous supply shortage as a result of the large shortage of development locations and strict regulations regarding nitrogen emissions. Unlike in the years before the financial crisis of 2008, when roughly 90% of all new construction consisted of speculative developments, in recent years the market has been dominated by built-to-suit developments, which has led to major shortages in practically all European logistics core markets. led. “We are now seeing an increase in speculative developments, which means that there is much more transaction dynamics as a result of the pent-up demand that has become available,” continues Hesselink.
The vacancy rate in most European logistics hotspots is very low: in the Netherlands and the United Kingdom around 4% and in cities such as Rotterdam, Lyon, Prague and Budapest even lower than 2%. Despite the increase in speculative developments since the second half of last year, the vacancy rate is not yet increasing. Vacancies that arose in the past year as a result of bankruptcies among users of logistics real estate have been immediately taken up again, mainly by e-commerce parties and 3PL's logistics service providers. After a pause due to strict lockdowns in the first half of 2020, a record take-up of 32 million m2 was achieved in the second half of the year, which is no less than 14% higher than the total take-up in 2019.
Annual rental growth was strongest in the United Kingdom with an average rental growth of 4.3%. London, the most mature e-commerce market in Europe, achieved average annual rental growth of no less than 12.5%.
In the Netherlands, large-scale XXL warehouses and locations for more intricate distribution models, for direct delivery to consumers, are responsible for 80% of the demand for logistics real estate. The transaction dynamics of large XXL logistics certainly failed to materialize in the first half of 2020 as a result of the pandemic. This market segment is largely determined by large foreign retailers who manage their European retail activities from the Netherlands. More than in other years, growth in 2020 was in food, electronics and pharmaceutical logistics in the segment between 20,000 m2 and 40,000 m2.
Rental price bandwidth in Dutch Logistics hotspot areas
Source: Cushman & Wakefield
Menno van Boxtel, responsible for the logistics sector within Cushman & Wakefield Netherlands, says: “The persistently high user demand means that every logistics space finds a user. This has led to an explosion of developments for both investors and end users. As a result, there is a risk of bubble formation in the market that can be prevented by focusing sufficiently on the right combination of location, building and demand.”
Important factors that will determine the further growth of the logistics sector in the coming years, according to Cushman & Wakefield, include:
- demography and urbanization: half of the total world population lives in cities and urban areas
- shortages on the labor market and sustainability: the COVID-19 pandemic has put the use of technology instead of labor more firmly on the map to maintain the production capacity of manufacturers and further regulations are putting sustainability even more firmly on the agenda of both investors and users
- explosive rise in e-commerce: newcomers to retail are more likely to opt for investing in a well-functioning distribution network rather than in a traditional retail platform.