Modern logistics units in demand – Jones Lang LaSalle
The pressures on retailers to reduce their supply chain costs and the changes in consumer markets are having an effect on their floorspace requirements when it comes to logistics property, as shown by a new survey of supply chain professionals conducted by Jones Lang LaSalle.
JLL says 71% of respondents identified pressure to cut supply chain costs as a top trend for the next five years; 61% cited the speed of change in consumer markets while 39% named the growth in internet retail. Respondents were also asked to rank their three biggest challenges over the next five years: 95% said energy and transport costs; 76% cited changing consumer demand; and 66% said transport infrastructure constraints.
More than three quarters of those surveyed said they require new-build (33%) or modern (44%) floorspace in order to achieve the desired results in response to these top trends and challenges; about half require distribution floorspace of more than 10,000 sq m and more than half do not want to commit to leases longer than five years for their logistics properties.
Jones Lang LaSalle says the expectations and requirements of supply chain managers support its view that the logistics property market will see above-trend demand for modern logistics units in the medium term, with rising demand for smaller units “such as fulfilment centres for home delivery, neighbourhood urban distribution centres and customer pick-up centres located at the fringe of larger cities”.
But decisions about logistics property may be postponed for now, with leading economic and sentiment indicators weakening since the start of 2012. Markets with a limited supply of modern available logistics properties are expected to have particularly low levels of activity in the next few months compared with last year, JLL says.
“We expect latent demand for modern logistics floorspace to come back to the market over the first half of 2013 when a global economy recovery is kicking in, according to latest consensus forecasts. By that time modern available floorspace will be in short supply in the majority of markets, further fuelling build-to-suit development activity,” notes Alexandra Tornow, head of EMEA logistics and industrial research at JLL.
“For equity-strong developers willing to be more opportunistic and return to speculative development, this could present an excellent opportunity to capture returning demand ahead of the competition,” she adds.
