Against a backdrop of renewed business confidence in recent months, logistics occupiers are returning to the market with a more ciritical eye, says Tim Crighton, head of logistics and industrial EMEA at Cushman and Wakefield.
Speaking to PropertyEU on the first day of Mipim in Cannes, Crighton said: ‘From my perspective, the most important element of what drives real estate is actually the customers' customer. It's the occupier's customer.’
According to Crighton, recent market cycles have seen a narrowing gap between prime and secondary logistics facilities, as investors chase returns without considering operational efficiency. However, with renewed confidence particularly over the past three months, businesses are returning to the market, but with a more discerning eye, demanding facilities that truly meet their needs.
‘Although there has been a lot of capital focused on logistics, it hasn't been nuanced enough,’ said Crighton, adding that ‘we must be focused on what makes it operationally relevant to the work environment.’
After the recent boom in logistics real estate fuelled by cheap debt, there is now a market correction in terms of occupancy rates, which is ‘healthy’ for long-term sustainability, he noted.
Instead of just chasing returns, capital needs to be directed towards decarbonization of supply chains, occupier efficiency, and building long-term value. This means going beyond just being a 'distribution centre', investing in intra-logistics technology and promoting sustainable practices.
Crighton sees technology as a ‘key differentiator' for C&W in 2024, pointing out that the entire logistics brokerage industry is ‘on the verge of a major transformation within the next five years, becoming more strategic and tech-savvy. ‘Our AI tools are uncovering unmet needs in the market, allowing us to proactively connect with potential clients before they even actively search for space,’ he explained.
The top countries in Europe for logistics development potential will remain the Netherlands, the UK, Germany, and France, including Poland, which Crighton identified as ‘a new core European market.’
While uncertainties on interest rates, inflation, and consumer spending have not completely vanished in 2024, some companies are starting to re-enter the market, deploying capital into deals that wouldn't have been considered previously.
Crighton is cautiously optimistic. He expects H1 2024 might be slow and early indicators like lower inflation and wage growth suggest the possibility of future base rate reductions, boosting confidence. ’Savvy investors often exit a market before it peaks and re-enter before it truly takes off,’ he added.
Looking ahead, Crighton sees two key trends in the logistics sector. The importance of domestic manufacturing and production will likely increase during this economic cycle, creating demand for logistics facilities that support these activities.
There will also be a surge in the development of smaller logistics units. While in the past cycle, the focus was on massive "big box" facilities, there has been a neglect of the small unit market for the past decade. There are a few niche players active in this space, but overall availability of units between 100 and 300 m2 is limited, while demand from SMEs remains strong.
