Contraction and integration of supply chains to lead to structural shifts in European logistics market

Significant shifts in global trade from recent events like the US-China trade conflict and the Covid-19 pandemic may cause the global economy to become less integrated, resulting in relocations of manufacturing hubs closer to target markets, according to the latest report from global real estate advisor, CBRE.

According to the report entitled ‘The Changing Flow of International Trade’, there is likely to be a significant shortening and integration of supply chains, increasing the demand for warehouse space. Retailers and wholesalers are expected to store months’ rather than weeks’ worth of inventory closer to population centres and service locations and manufacturers will look to diversify their supply chains so as to be less reliant on specific geographies.

In Europe there has been an uptick in retailers, such as Decathlon, positioning distribution hubs near Mediterranean ports, rather than centralising imports, particularly from Asia, in the traditional logistics hubs of Northern Europe. Consequently, Barcelona, Valencia and Marseille have all seen a boost in demand for logistics space.

Additionally, China’s Belt and Road Initiative is responsible for the expansion of logistics hubs in cities such Piraeus in Greece and Venice in Italy. The Chinese state-owned port in Piraeus is now the largest port in the Mediterranean by container volume, leading to a surge in demand for logistics space in the area. The Mediterranean Corridor project, due to connect six EU countries (Spain, France, Italy, Slovenia, Croatia and Hungary) via a 6000km multimodal link will more easily connect these Mediterranean ports with Central Europe, further strengthening their position as logistics hubs.

Another expected change is that as demand for consumer goods continues, ports will no longer be able to rely purely on their size but will also need to implement cutting edge technology to ensure optimal growth and increase efficiency. According to CBRE, European ports could increase their capacity and subsequent demand for logistics space through better software, automation and inventory controls. As such, the introduction of remote-control cranes and self-driving vehicles is likely, whilst in Rotterdam, one of Europe’s largest ports, unmanned trucks and automated vessels already exist.

Jack Cox, Head of EMEA Industrial and Logistics, CBRE
The logistics sector has proven to be the silver lining of the Covid-19 pandemic as an increased reliance on ecommerce has further increased demand for warehouse space. However, core logistics hubs across Europe remain land-constrained. This coupled with a disruption to supply chain dynamics means we are likely to see a continued diversification of logistics centres across Europe.
Jack Cox, Head of EMEA Industrial and Logistics, CBRE