An additional 3.5m sq m (circa 37m sq ft) of last-mile logistics space will need to be delivered across the top seven e-commerce markets of mainland Europe by 2026 to meet a projected 48% increase in online retail sales, data from Knight Frank reveals.
According to the consultancy group’s European Logistics Report 2022, for each €1bn spent online around 24,000 sq m (circa 258,000 sq ft) of urban logistics space is required to fulfil sales. And with online retail sales projected to increase by €142bn to €434bn over the next five years it is anticipated demand for urban distribution hubs will soar by 3.5m sq m.
Germany is expected to require an additional 1.37m sq m (circa 14.7m sq ft) of space by 2026, France could require approximately 639,000 sq m (circa 6.8m sq ft), Poland might need an additional 536,000 sq m (circa 5.7m sq ft) and in Spain the figure is projected to be around 378,000 sq ft (circa 4m sq ft).
However, Knight Frank’s data highlights there has been a reduction in the availability of land zoned for industrial use across many leading European markets, and with vacancy rates running at record lows in some countries demand is likely to continue to outpace supply, which should sustain rental growth across mainland Europe.
Claire Williams, industrial and logistics research lead at Knight Frank, says: “As Europe’s urban population continues to swell, consumption in these centres will rise concurrently. Paired with growing online retail penetration and a continued focus on convenience and speed of delivery, the result will be increased demand for urban logistics space across the continent.
“Competition between use classes is constraining logistics development, particularly in those locations with the highest population densities. Though the adoption of new and emerging technologies is enabling more efficient use of space and potentially lessening the total amount of space needed, the shortfall of available urban distribution space is likely to persist for the foreseeable future, supporting rent levels in urban markets across Europe.”
Richard Laird, co-head of European capital markets at Knight Frank, adds: “Several markets across Europe are well-positioned to benefit from high growth economies and expanding retail sales. While Covid has accelerated growth in online retail and home delivery, some European markets remain some way behind more mature e-commerce markets such as the UK, therefore offering the potential for further expansion. Robust tenant demand and limited supply are driving up values and encouraging investors to expand their urban logistics platforms.”
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