Logistics & Industrial Asset Optimisation

The ongoing growth in e-commerce will continue to impact demand across most, if not all markets. Although the growth in online retail sales volume has been relatively subdued in 2023, forecasts indicate a return to growth in the coming years. This will not only drive demand for warehouse space, but there is also likely to be flow-on demand for micro-hubs and last-mile sites as retailers adapt their online sales fulfillment strategies. demand in aggregate is off recent peaks, it remains in positive territory. However, there is nuance at the local level with several forces are at play. After experiencing significant expansion during and after the pandemic, growth in the European logistics and industrial sector is starting to normalise. While this means space CHANGING TRENDS IN LOGISTICS & INDUSTRIAL ASSET MANAGEMENT

Additional space demand will also be driven by manufacturers as they start to implement near-shoring strategies – locating production or supply to locations closer to consumption markets. While this is, in part, reaction to the supply chain disruptions caused during the pandemic, other factors are in play. The arbitrage in labour costs between off- and near-shore locations, while still considerable, is declining and is further eroded by elevated transportation costs. Adding in a volatile geopolitical environment and the need for greater supply chain transparency to meet ESG criteria creates a more compelling argument for relocating production closer to consumer markets. The nature of near-shoring will vary between sectors and companies within those sectors. In turn this will have differing impacts on production locations and exact space requirements. For example, relocating to locations with higher labour costs could drive the need for full automation, or manufacturers with high volumes of product could benefit from locating in inter-modal hubs.

Ultimately, such changes are likely to require either partial or full supply chain optimisation programs. This provides opportunities for industrial asset owners who are prepared to collaborate with tenants to explore the potential delivery of new facilities. Helping tenants make savings in transportation costs not only reduces greenhouse gas emissions, but could also offset the higher economic rents required to develop new sites. Further downstream benefits could also be realised through more efficient warehouse design and operation. Together these factors provide direct benefits to asset owners in the form of reduced Scope 2 and Scope 3 emissions as well as potentially higher returns and stronger tenant relationships.

LOGISTICS & INDUSTRIAL ASSET OPTIMISATION FOR TOMORROW

CUSHMAN & WAKEFIELD

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