Fundamental changes in supply chain, consumer demand and investor interest drive warehouse market to new heights – EuropaProperty

According to CBRE, the pace at which the industrial & logistics (I&L) market is evolving is by far the most significant across all traditional real estate asset classes.

The surge in activity is driven by both changing occupational as well as investment market related factors. Across Europe, investment in the industrial segment was up by 50 percent during 2013 – allowing the sector to achieve the highest growth rate year-on-year. Strong investor interest is set to continue with some significant deals underway to be signed. Reasons for this increase are a wider acceptance of this segment – previously seen as niche- increasing allocations into real estate, partially due to a low-interest-rate-environment and an expected rebound of economic activity in Europe and bottomed-out rents expected to go up in line with economic growth.

“Central & Eastern Europe (CEE) is among the regions to benefit strongly from these factors. Rock-bottom rents combined with increasing industrial production support the belief we will start seeing rental growth in a number of markets soon. On top the region offers great potential for developers still based on a rapidly improving infrastructure network and the increasing sophistication of the I&L segment on the back of effects online shopping has on the way goods need to be delivered to the end-user.” said Joerg Kreindl, Senior Director, Head of CEE Industrial at CBRE.

With improvements in connectivity between Western Europe and CEE, and the growth of industrial production and manufacturing, there will be greater outsourcing in 2014 to specialist logistics companies. The quest for efficiencies places a premium on highly accessible facilities and high-throughput urban sites. Centralization of operations and inventory control are among the key advantages of XXL warehouses that saw significant growth in demand last year.

According to CBRE, conditions are in place for a widespread resumption of development in 2014. Other than build-to-suit schemes, the I&L development pipeline has been very thin for some time. Improvements in the economic and occupational market conditions combined with significantly increased investor interest have encouraged developers to begin bringing schemes forward in a number of locations.