Published On: Wed, Feb 18th, 2015

Logistical Real Estate Experiences a European Boom

Property investment is a traditional form of business with both residential and commercial properties. But one type of property is seeing a surge in Europe, according to the Financial Times. Ecommerce is driving a boom in logistics property investment. Retailers are attempting to keep up with consumer desires moving more and more into the online world. As they do so, they need more space for warehousing and distribution hubs. Investors spent €19.8 billion on these types of property in 2014, a higher amount than in the previous seven years and 34% more than 2013. The cause of this is retail companies trying to maintain and expand changing supply chains.

warehouse

In the UK, investment in logistics properties rose by 65%. It reached €7.9 billion in 2014, reports Property Data. The rest of Europe saw expansion too. Online retailers are growing, and e-commerce across borders is becoming more common. Ireland saw a substantial increase in investment too. Meanwhile, Finland and Spain also experienced sharp rises in the figures. Where retailers once did everything in stores, it’s now taking place in warehouses and similar. Ecommerce retailers now have to expand to add distribution space to their businesses. But they need to add other services too. A retail business might need a pallet collection and delivery service, a fleet of delivery vans and drivers, and a customer service team dealing with deliveries.

Major UK businesses such as Next, Waitrose and Primark have sought out new warehouses of over 900,000 square feet. Meanwhile, international firms are getting a look in too. Amazon has secured 1 million square feet of warehousing in the Midlands. It’s ideally positioned for delivering all over the UK. Firms are taking advantage of the wider European market too. Amazon is building fulfillment centers in Poland and the Czech Republic. Meanwhile, ASOS, a British fashion retailer, has opened a distribution hub in Berlin. They have also recently secured an adjacent plot to begin expanding.

Nick Beighton, chief operating officer at ASOS, said: “Europe is a very big market with lots of potential, so we’re investing heavily. Customers are demanding different experiences…The upstream supply chain has to change.”

Companies are primarily investing in massive fulfillment centers of over 500,000 square feet. But they are also looking at smaller parcel delivery facilities in dense city zones. Distribution centers in urban locations offer businesses access to dense populations. Logistical real estate is becoming more popular with investors. They realize that they can have long leases on a property that’s easily managed. Rents are on the rise, due to a growth in demand an undersupply, leading to better returns for investors.

As online retail continues to expand, businesses everywhere will need to meet demand to deliver straight to their customers’ doors. Warehouse space and distribution centers are essential to this type of retail. So the requirement for logistics real estate will only continue to grow. Perhaps commercial property investors should consider changing their tack to fit this growing market.