European Logistics Market Faces Uncertainty

LONDON-The outlook for the European logistics market faces growing uncertainty, say researchers at Cushman & Wakefield. According to the firm’s European Distribution Report issued in mid July, the positive growth in Central and Eastern Europe (CEE) that has largely driven the market over the past two years may slow significantly as the effects of the credit crunch ripple across the continent. Though key markets are forecast to remain stable given their lower levels of take-up, the relatively low amount of land available for development and the associated premium land prices, secondary markets may decline due to the relatively “footloose” demand they tend to satisfy.

According to report author Elaine Rossall, associate director of Cushman’s London office, over the past two years demand for distribution space has remained buoyant across all markets. As a consequence of improved economic growth, performance has been positive, with consistently high demand, particularly for larger facilities used by retailers and logistics and 3PL firms. These same users have led to an increasing focus on the highest quality space in locations with the greatest accessibility. Additionally, says the author, shorter lease terms have become an established feature of the market. This is particularly true in Western Europe where contract logistics is more established, but she calls the trend increasingly pan-European.

But Rossall says the general economic slowdown is having an impact. Though she does not expect the requirement for top-quality space to diminish, clients looking to cut costs will be searching out less expensive locations as long as infrastructure is suitable for logistics operations. At the same time, she cautions, a sustained reduction in consumption or drop in disposable income would inevitably have a negative impact on the distribution sector, leading to moreconsolidations and acquisitions. Rising oil costs are also likely to have an increasing impact, leading to greater use of inland waterways and rail and more concern with finding central locations.