#PROVADA Reshoring drives demand for European logistics space

The trend among European companies to repatriate production back from low-wage countries such as China is a major driver for European logistics space, a PropertyEU briefing at the Provada real estate fair in Amsterdam has heard.

´Companies bringing production back closer to Europe is a very important factor for the growth of logistics in Poland. The market is driven by much more than just e-commerce,´ according to Hadley Dean, managing partner for Eastern Europe of Colliers International.

One of the most logical locations to serve as European transport hub within a nine-hour journey is the Silesia region - mainly in Poland, and partly in the Czech Republic and Germany, Dean said.

Serbia is the next most suitable location, said Damian Harrington, Colliers head of research for the region. This has yet to be recognised by market players, Harrington said, as Serbia has about 'zero' modern logistics space. Russia, in contrast, is rapidly expanding its logistics network to supply the sprawling country, and 700,000 m2 is under development there at the moment.

Dean and Harrington were speaking during PropertyEU's European Logistics Briefing, held as part of the International Day at Provada.

In terms of e-commerce warehouse requirements which account for about 35% of the market, Dean sees more potential in Western Europe. E-commerce and the need for same-day delivery is creating a huge shift, he said. 'The opportunity is in western Europe. There is a big need there for a different quality product.'

Dean cited Swindon in southern Wales and the Scottish capital Edinburgh as locations with particular potential. At the same time, these are not necessarily the places that investors have on their map, he conceded. The investment community still faces quite a learning curve, he said.

Demand is particularly strong for very large units, the briefing heard, that serve as the central distribution point under the hub-and-spook principle. End-users then move goods to smaller, last-mile units close to urban areas, which is just beginning to become an investment segment.

Tia van Beek, Netherlands country manager for developer-investor Goodman noted that tenant demand was high, while the supply of available big units remained very low. ´If you are looking for a facility of 30,000 m2 in a prime location you won't find it,' she said.

Nevertheless, the Netherlands remains a prime logistics location due to its excellent road and rail networks, Amsterdam Schiphol Airport, and Amsterdam and Rotterdam ports. Goodman, Van Beek added, expects growth in urban warehouses next to urban areas. 'This is driven by consumer demand. Hopefully it will happen soon in the Netherlands.'

The panel was asked how it would invest a fictional €500 mln in the logistics sector.

Jeroen Smit, managing director Benelux, Spain & Italy for Blackstone's European logistics platform Logicor, said he would invest in speculative development to take advantage of the lack of suitable supply caused by the development slowdown in the aftermath of the credit crisis. 'Or, one could invest in markets where product could be acquired for less than replacement cost.

Collier's Harrington said he would leverage the €500 mln to invest in developing logistics in the Silesia region of Poland, and in 'spoke' urban locations.

Van Beek said she would also apply leverage to invest in e-commerce locations and brownfield sites in the Netherlands. Dean said there were opportunities across Western Europe due to the current ageing stock. "I would also acquire as much land in key markets in Spain and get it pre-leased.'