X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Logistics spending in Central and Eastern Europe is expected to grow dramatically between now and 2010. A new report from Analytiqa, a UK-based logistics and supply chain research company, finds that spending on contract logistics services across six key markets in the region is set to increase by almost $10.7 billion over the next three years as the size of outsourced contract logistics market grows by 89%.

“The next few years promise to be exciting and dynamic time for the Central and Eastern European logistics industry,” says Analytiqa research director Mark O’Bornick. “The improving economic stability of the region is reflected in the unprecedented levels of foreign investment into the region, which is driving growth in manufacturing activity.”

While O’Bornick acknowledges growth statistics are based on a relatively small base, he calls the figures impressive nonetheless. He points out that Poland’s logistics market, the largest in the region, grew by 33% from 2005-07. Less developed logistics markets such as Bulgaria and Romania had slower growth rates, but Analytiqa forecasts explosive rates for the two countries going forward. The company forecasts 82% logistics growth for Bulgaria by 2010, while Romanian markets will grow by more than 22% annually.

The report says third-party logistics companies (3PLs) are set to capture a significant share of this growth, which should create opportunities for experienced developers to enter the region. According to Analytiqa, warehouse infrastructure, as well as transportation infrastructure, is inadequate to meet demand, especially in the Czech Republic, Hungary and Bulgaria, which the company projects will become the region’s logistics hubs and cross-docking stations.

“Logistics providers face significant challenges if they are to succeed in the region and tap into the huge potential that Eastern Europe offers,” says O’Bornick. “Having researched the market with the help of Europe’s leading 3PLs, they are acutely aware of the opportunities, but until now, have not been able to quantify the size of the prize.”

O’Bornick says growth of the region’s logistics industry follows rapid growth in the manufacturing sector. Though Poland, the Czech Republic and Hungary are no longer the extreme low-cost production centers they were, he says significant cost differentials still remain compared to Western Europe. However, he expects manufacturers to begin migrating to even cheaper locations in Bulgaria, Romania, Ukraine and Russia, where they would also be able to target expanding domestic markets.

The extent of opportunities for US developers is unclear. According to the report, while many Western European 3PLs are following their customers into Central and Eastern European markets, at present service providers within the region are much more likely and willing to take risks in the development of speculative warehouse facilities. Using local connections, they will seek to benefit from access to prime locations in forthcoming years.

On the other hand, it is also likely that the local subsidiaries of Western-based 3PLs will force implementation of technology improvements, raising the bar in terms of acceptable standards of practice and creating demand for more experienced and sophisticated developers. Analytiqa says the Western subsidiaries will ultimately come to dominate the market as the need for logistics services expands too quickly for local companies to handle.

“Demand for logistics will be sustained by expanding markets, with contract logistics services in particular, being driven by both ends of the supply chain,” O’Bornick observes. “Along with the rapid growth in manufacturing activity, higher disposable incomes and increasing affluent consumers are demanding greater quantity and more variety of products, from food and drinks, through to pharmaceuticals, consumer electronics, telecoms and even cars and motorcycles.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.