Online retail sales are set to be the key driver of growth in the European logistics property sector, with an additional 19m sqm of logistics floorspace required to support projected ecommerce expansion by 2029, according to Claire Williams, head of UK and European industrial research at adviser Knight Frank.
Online sales across the UK, Germany, France, Italy and Spain are expected to reach €565bn by 2029, accounting for nearly 21% of total retail sales and representing a significant increase from €389bn in 2024. Knight Frank research indicates that each €1bn of online sales requires approximately 108,000sqm of warehouse space.
“If this relationship holds, the additional €176bn in annual online sales expected by 2029 will translate into demand for around 19m sqm of additional logistics floorspace,” Williams explains.
Cross-border ecommerce and the growing market presence of Chinese platforms such as Joybuy, AliExpress, SHEIN and Temu are expected to contribute meaningfully to growth across Europe. “Increased competition may lead to an arms race as firms seek to rapidly scale their operations,” Williams points out.
Beyond ecommerce expansion, occupier demand in the logistics space is being driven by rising defence investment, nearshoring trends and tighter trade regulations that are reshaping European supply chains. Together, these factors are contributing to strengthen demand for modern, well-located logistics facilities, Williams says.
Meanwhile, improvements in automation and rising clear heights are increasing operational efficiency and boosting buildings’ cubic capacity. In its recent Industrial Future Gazing report, Knight Frank highlighted the potential for taller warehouses to alleviate some of the forecast pressure on floorspace resulting from ecommerce growth in Europe. The firm noted that average UK warehouse clear heights have risen by more than 50% over the past two decades, enabling ecommerce occupiers to benefit from greater operational efficiency.
The vertical shift in industrial and logistics operations represents a significant trend with potentially profound implications for investors across the sector, adds Williams.
“If clear heights continue to rise, the amount of floorspace needed to accommodate future ecommerce growth will moderate, while demand for tall, modern and well-specified logistics assets capable of supporting advanced operations will strengthen,” she says.
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