As confidence returns to the European distribution centre property market there will be competition for connected networks, writes Ben Segelman, Head of Portfolio Management – European Logistics, at Brookfield.
The tail end of 2024 has brought promise to the logistics real estate market in Europe. With inflation on the turn and interest rates cooling off, we have seen several large asset portfolios come to market. Within our own portfolio, occupancy rates are growing, largely driven by built-to-suit projects with large corporates. Tenants are reimagining supply chains for a modern world and are hungry for high-quality spaces that will meet longer-term needs across key themes of automation, digitisation and sustainability.
All in all, 2025 is looking to be an exciting and transformative year for the European logistics market as previously eroded confidence returns. This will bring challenges and opportunities that businesses need to be aware of to ensure they secure a robust future for their supply networks.
Confidence brings competition
Perceptions of supply chains have shifted from a basic necessity to a strategic asset. Confidence and more favourable economic conditions returning to the sector means more businesses are looking to refresh their logistics strategy and as such, competition for warehousing and logistics space on the continent is fierce. This is also being driven by the rush for data centre space to support the artificial intelligence explosion.
As so-called ‘connected land’ becomes even more scarce and demand outpaces supply, rental prices are going to continue to be pushed up. Not only that, but businesses will find themselves in competition for labour. As a result, organisations need to be making decisions in 2025 that future-proof their operations for the next 10 to 20-years. These plans need to be adaptable to business needs and macro trends which are rapidly evolving.
Abandoned plans will regain momentum
With inflation starting to tumble down from high peaks, projects that were put on hold due to high costs in countries such as Poland have been picked back up. This could mean that trends that have been widely discussed but never quite come to fruition in the way the industry expected, such as nearshoring, will gather momentum again. However, the complexities of a quickly evolving industry need to be navigated. I expect that this will be achieved by companies across the supply chain, from sourcing to fulfilment, prioritising automation, digitisation and sustainability in their supply chain premise acquisition plans.
From landlord to strategic partner
Scarce space, intense talent competition and a landscape changing at breakneck speed will make advantageous partnerships more important than ever in 2025. Landlords will not simply be the owner of the space a business happens to occupy, but a strategic partner to warehousing and logistics plans. Asset managers who can leverage the power of ‘connected networks’ and unlock access to land banks and the grid will be vital in achieving maximum operationality from spaces.
Campus locations will reign
We are already seeing a renewed focus on strategic, best-in-town locations that offer access to efficient and low-carbon transportation routes. For example, sites based on highways that connect two or more major distribution hubs, rail or water networks and airports. In addition to this, spaces which attract talent through good commuting links and extra amenities are going to be crucial to addressing talent competition. As a result, I expect a move to campus locations, such as multi-functional logistics parks, will be an emerging trend. This also supports sustainability strategies as neighbouring premises can share green resources such as electric vehicle charging and solar panels.
2025’s decisions drive 2035’s success
The logistics asset market on the continent is poised for activity in 2025, but getting it right next year is going to be crucial for businesses that want to obtain long-term security in their supply chain strategy on the continent. Those who are ready for competition, strategising with developing trends in mind and working closely with partners in the sector will set themselves up for success.
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