Earlier this year, PropertyEU announced that Goodman Group has taken the lead for the fourth year running in our annual Top Developers ranking.
Earlier this year, PropertyEU announced that Goodman Group has taken the lead for the fourth year running in our annual Top Developers ranking.
The Sydney-listed company won the top spot for the overall ranking, ahead of both office and retail developers as well as its own logistics peers based on projects completed between 2012-2014.
The strong performance is partly due to Goodman’s success in reeling in one of the biggest fish in the ecommerce sector: US-based Amazon. Over the past eight years, Goodman has developed just over 1 million m2 for Amazon across 13 different projects across Europe including Germany, France and Poland. As a result, Goodman has recorded a steady pipeline of new developments coming to the market of just under 2 million m2, rising to 2.1 million m2 in the three-year period to end-2014.
In late 2014, Goodman completed its 13th project for Amazon in Wroclaw, which marked Amazon’s first centre in Poland. The 123,000 m2 facility is the largest in Poland and also one of the biggest free-standing logistics centres in CEE. At present, the Australian company has no new developments for Amazon in the pipeline, but Goodman’s Continental European managing director Philipe van der Beken expects a sizeable and consistent volume of development over the next two to three years of around 1.9-2 million m2. ‘We have a broad customer base and solid platform across Continental Europe. Assuming current market dynamics remain, I expect we will be able to generate the same volume over the next two to three years.’
Appetite for big sheds
Despite its strong expansion so far in Europe, Amazon’s appetite for big sheds has by no means waned. US developer Panattoni is currently developing a 130,000 m2 facility for the ecommerce giant in Prague and last year completed a mammoth 246,000 m2 project. Prologis has also developed several built-to-suit sheds for Amazon totalling some 140,000 m2 across Europe as well as facilities in Cologne, Prague-Jirny and Tilburg for other ecommerce players. According to PropertyEU data, Amazon has accounted for more than 1.6 million m2 of logistics space in recent years.
Mega sheds have also become the norm for other ecommerce players. At end-August, Panattoni announced it has won a contract to build a 120,000 m2 warehouse for ecommerce firm Jago near the west German border town of Hückelhoven. Panattoni Europe said it is investing a sum ‘in the high double-digit million-euro range’ in the construction of the facility, which it claims will be the largest of its kind in Germany.
Germany may have witnessed the emergence of XXL sheds, but they are now popping up throughout Europe and beyond. Two weeks ago US sports equipment manufacturer Adidas announced it has acquired a 120,000 m2 warehouse in Moscow from Russian developer PNK Group. Financial details were not disclosed but market sources have put the volume at between $70 mln and $100 mln (€62 mln to €89 mln). JLL, which advised on the deal, said it represents the largest purchase of a warehouse by an end-user in the history of the Russian market.
The proliferation of XXL sheds marks a new phase in the European logistics industry that Goodman in particular has pioneered. While 40,000 m2 was traditionally a large size for a distribution facility, Amazon was seeking a facility of 80,000 m2 when it first entered Europe, Goodman’s Van der Beken told PropertyEU.
Initially the large size of Amazon’s new distribution facilities sparked incredulity and scepticism, but the function of such buildings is becoming more recognised and accepted, he noted. ‘Amazon was a pioneer and the size of its first facility made it a big risk. Now the average size of many retail and e-commerce buildings is increasing.’
The new norm
Amazon’s very large sheds of 100,000 m2 or more may be twice as big as the old norm, but facilities of between 20,000 and 50,000 m2 have in recent years become more common, noted Andy Gulliford, chief operating officer of UK REIT Segro. ‘That’s the way it’s going. Large XXL sheds and mega campuses have become the order of the day.’
The growing size of logistics sheds runs parallel with - and may even explain - another trend: investors are forking out more money for logistics assets. Indeed, in the second quarter of 2015, investors spent a record €6.1 bn to acquire European industrial and logistics property, according to data from CBRE.
With logistics platforms mushrooming in Europe and a growing development pipeline, there is no sign that the flow of capital into the sector will abate any time soon. ‘This sector will really open up in 2015 and become a bigger part of the investment market,’ Iryna Pylypchuk, director of global research at CBRE, predicted at a recent PropertyEU Outlook briefing.
Against this background, it seems safe to conclude that XXL sheds and stronger capital flows into the European industrial and logistics sector are both here to stay.
Judi Seebus
Editor in chief