E-commerce growth contributing to an increasing global demand for logistics space
Research predicts that demand for logistics space will continue to intensify over the next three years, even when compared to recent elevated levels
Strong growth in the e-commerce sector, as well as growing express and parcel deliveries, third-party logistics, healthcare and life sciences, and construction and materials, will all cause increased demand for warehouse and distribution facilities, according to a survey from JLL.
While retail was already in a digital shift, the pandemic has accelerated the change and pushed companies to revamp their decision-making process to focus on speediness, inventory stocking and new technology. Last year, e-commerce was the overall standout performer in the logistics sector, marking the highest year-on-year growth take-up by any occupier group globally. It represented over 16% of 2020 total logistics and industrial leasing in the US, 22% across Europe and as much as 30% in China.
To sustain future growth, survey respondents pointed to two concerns that must be addressed. The first is the limited supply of entitled land for logistics, with firms already delaying decisions because of a lack of space. For example, vacancies are sub 3% in several cities including Toronto, New York, and Los Angeles. Some 65% of respondents in Germany, China, the Netherlands, and Australia deemed limited availability of entitled land as the biggest constraint on occupier demand.
Secondly, the sector must be faster to adopt sustainable solutions. Currently, the focus is mainly on solutions that yield cost savings. Almost three-quarters of respondents (73%) rated improving energy efficiency as the highest priority globally.
In Europe, there is a greater impetus to reduce overall carbon emissions and use sustainable transport, signalling the direction of travel for the entire industry. This geographical area had the highest share of respondents (40%) stating that they observe some occupiers already taking "significant action" toward decarbonisation. However, Asia Pacific had the largest share of respondents (47%) say that "enhancing green/renewable energy generation and use" is a high priority over the next few years. Rooftop solar panels and wind turbines are the primary examples of this kind of investment. On the other hand, the Americas lag on renewable energy, possibly due to a lack of government incentives to support implementation.
Looking ahead to the sector's future, technology will play a major role in transforming building design and supply chains. Currently, only the larger occupiers and developers with global and regional networks have adopted advanced technologies and automation solutions, but 90% of global respondents agree or strongly agree that investing in automation and robotics is the clear option for improving supply chains in the future.
"E-commerce continues to propel a huge wave of industrial leasing globally, and the demand is becoming more widespread across all industries," said Craig Meyer, President, Industrial, JLL. "The number of unique active tenants has surged as companies rush to build up their e-fulfilment capacities and, despite a normalization of the market as the effects of the pandemic wind down, we expect to see this trend hold strong over the next three years."