Prologis, a real estate asset management company, has analyzed the trends and future challenges of the real estate sector in Spain and the rest of Europe. Within the framework of SIL 2022, the leading logistics, transport, intralogistics and supply chain fair in southern Europe, which is taking place in Barcelona from May 31 to June 2, the company has identified some of the structural factors and segments that will continue to drive demand for years to come.
During the presentation of a study on the new trends in the real estate logistics market in Spain and Europe after the pandemic, Dirk Sosef, Vice President of Research and Strategy at Prologis Europe, has commented on the factors that allow real estate logistics to be an increasingly resilient sector. Sosef has highlighted the current low supply levels in Europe, three times less stock per household than in the United States.
E-commerce is expected to continue breaking records in Europe
This does not, however, prevent e-commerce from continuing to break records even after a period like the pandemic, which has provided the definitive boost to this business segment. E-commerce sales are expected to grow by 85% in a period of just five years, adding up the 12 European countries in which Prologis operates. In the Spanish case, e-commerce sales will continue to rise, but somewhat below the average for the European Union.
The study presented by Prologis also concludes that the distribution of supply chain costs creates opportunities. Between 45% and 55% of the costs of the supply chain correspond to the transport of the goods, between 25% and 30% to labor, between 20% and 25% to inventory costs and about 5% to rent. In addition, 1% of the savings in transport and labor costs can be equivalent to about 15% in investment in real estate logistics.
Record logistics demand in 2021 in Europe
Another of the main factors that define the current state of the real estate sector is the record demand throughout Europe. In fact, in 2021 an annual growth of more than 60% was achieved between the markets of southern Europe, central, northern, eastern European Union and the United Kingdom. However, this growth is not accompanied by a large availability of land to build logistics buildings. In reality, the scarcity of land is a palpable reality throughout Europe, according to market data, especially in Western Europe and the United Kingdom. In Spain, the situation is slightly better. If in Europe as a whole the vacancy rate is 2.8%, in our country the rate is close to 6%.
The increase in construction costs, the absence of raw materials to channel logistics developments, the lack of labor in some logistics hubs, regulatory problems in the processing of plots and the lack of land itself are some of the systemic challenges that jeopardize the growth of the sector. These factors are going to have an impact in the short and medium term on the rents paid by logistics operators, although this trend, Prologis points out, is not so pronounced in Spain.
For his part, Cristian Oller, Vice President and Country Manager of Prologis Spain, has analyzed some of the concepts that are called to be essential for the growth of a sector that creates wealth and generates thousands of jobs in our country. According to Oller, “the evolution from just-in-time to just-in-case is already benefiting the sector, which is clearly betting on resilience in each and every one of the operations.” The advance of e-commerce, Oller has pointed out, will demand significant changes in important Spanish cities in order to respond to the growing needs generated by this business, “in terms of employment, sustainability and connectivity between large urban environments”.
Logistics, a growing industry and net source of employment in Spain
Oller recalled that a million people already work in the logistics sector in Spain, an industry, stressed the Country Manager of Prologis in our country, “which is on everyone’s lips due to the dynamism it brings to the economy and the profiles professionals with great added value who are being attracted by a sector that offers good job alternatives”. Lastly, the manager mentioned the good level of public-private collaboration in our country, “key to success in a multitude of projects that have advanced our society”. However, Oller has indicated that there are still many things to do and has called for “greater agility from the institutions to channel the demands of the sector with more land and better quality in the main logistics poles.”
Rental of a new “turnkey” development of 30,000 square meters
In line with the exponential growth in the logistics industry in Spain, Prologis has announced during the presentation of the study the development of a 30,000 square meter building for one of the largest retailers in Europe in the Prologis Park San Fernando. The warehouse will be fully automated and will facilitate the logistics operations of the online channel of this large retailer. Prologis anticipates that products will be distributed from this warehouse to more than 8 million people. The client is expected to start operating at these facilities from the third quarter of 2023.