Distribution. Freight. Transport. Warehousing. It’s all now called logistics. At MIPIM this means real estate for the movement and storage of goods, products and materials. It’s a massively important but relatively unsung aspect of international real estate. In MIPIM terms it also covers the provision of infrastructure that facilitates the movement of goods and services.
From being seen as something as a poor relation in real estate, logistics now has taken its rightful place at the heart of the industry. A report from consultant Savills released at MIPIM even suggested that logistics is becoming the new retail.
Specialist logistics provider Prologis points out that every €1bn increase in online sales requires an additional 72,000 sq m of distribution warehousing.
Savills said in 2014 investment in the UK logistics market rose by 54% to total £4.2bn, the highest year on record. In Europe volumes rose 29% to €30bn, nearly up with the record volumes of 2007, and above the long term yearly average of €22.2bn.
Savills reckons that 8.7 million sq m of new logistics property will be required across Europe by 2020, with demand driven by online shopping, retail consolidation and major food retailers servicing consumers in different ways. The firm forecasts that the rising value of Europe’s online retail market, which is set to increase from €112bn to €233.9bn over the next three years, will see the take up of logistics space continue to soar.
At MIPIM delegates learnt that investors are attracted to logistics for a combination of reasons, including the tendency to secure long term leases to strong tenants. Also more than any other asset class logistics is a cross border operation. Fashion retailer Asos serves customers globally from a warehouse in Barnsley in northern England and retailer John Lewis serves 170 different countries from its units in Milton Keynes in southeast England.
The underlying structural driver in logistics demand is the exponential explosion of online retailing. This has consequences for global supply chains which are resulting in new logistics space being required. It’s clear that the future is logistics. And always will be.
In other logistic news at MIPIM, Logicor, Blackstone’s European logistics arm is on the lookout for more opportunities in northern Europe, particularly Germany, the Netherlands and Belgium, the company’s CEO Mo Barzegar told MIPIM News.
The company’s top four core markets are France (1.7m sq m), UK (1.3m sq m), Germany (977,000 sq m) and Poland (897,000 sq m) but over the last 12 to 18 months opportunities have arise for expansion into southern European markets of Spain, Italy and Portugal. Barzegar said that Logicor needs 400,000 to 500,000 sq m in a market to achieve sufficient scale.
On the infrastructure side, French city Bordeaux is making ready for the arrival of a rapid rail link to Paris. which is due to open in 2017 and will reduce travel time to the capital to two hours.
The upgraded rail service to Paris — about 590 km away and currently a three to four-hour train journey — will unleash the potential of a large area of neglected land next to the rail station.
Top photo: MIPIM 2015 logistics lounge
Image: Image & Co