Opportunities abound: trends and challenges impacting on logistics and industrial real estate
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Transcript of Opportunities abound: trends and challenges impacting on logistics and industrial real estate
Opportunities abound Trends and challenges impacting on logistics and industrial real estate
Key observations
1
Continuity of trends and challenges Continued strong pressure on companies to align real estate portfolios = continued high levels of occupational demand = significant opportunities for landlords, developers and investors.
An intriguing paradox Slow on-take of many trends and challenges experts sustain will have a significant impact on businesses in the future = supply chain alignment not future-proof?
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
2
Trends & Challenges
Driving the logistics and industrial sectors in the next
3-5 years
3 3 2
The major trends and challenges identified were unsurprising…
3
1 63%
2 40%
28%
Top 3 Trends
e-commerce/ multi-channel retail
emerging markets
new technology implementation
1 73%
47%
40%
rising transport costs
shorter order lead times from customers
rising energy costs
Top 3 Challenges
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
… but are respondents neglecting the next big thing?
4
Changing customer demand 17%
New product introduction
15%
Near-sourcing/ re-sourcing
15%
Transport collaboration
20%
Evolution in maritime transport
15%
Increasing urbanization
11% Outsourcing
19%
End-user demanding
sustainability 11%
Urban logistics 22%
Increasing customer returns 17%
Labour availability
15% Labour costs
17%
Aging transport
infrastructure 23%
Reducing real estate costs
15%
Regulatory measures
17%
Improving operational efficiency of
facilities 15%
Rising supply chain risks
26%
Supply of land/logistics
buildings 15%
€
Trends
Challenges
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
5
Q. Is current network realignment in manufacturing and logistics
adequate to sustain companies competitiveness over at least the next five
years?
6
1 Today’s supply chain alignment will sustain operational needs for at least the next 5 years as current major trends and challenges will remain the main driving force.
2 There is some risk that a number of trends and challenges could become more significant than currently expected – but this will not impact significantly on network alignment over the next 5 years.
There is a significant risk that businesses are missing important trends and challenges. Today’s network alignment is not adequate to remain fully competitive over the next 5 years. 3
7
Occupational demand
Business and real estate strategies and requirements that will impact future occupational
demand
Continued elevated occupational demand over the next three years
8
Respondents indicating expected change in their logistics and industrial portfolio occupied over next 3 years
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
65% of companies expect to
increase occupied logistics floorspace
36% of companies expect to
increase occupied industrial floorspace
Pressure to service increasingly demanding customers and to reduce costs drives occupational decisions
9
65% Level of customer
demand
57% Improving
customer service
37% Service growth in
online retail
37% Reduce overall
occupancy costs
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
% of respondents indicating their top 3 drivers of change in occupational portfolios over the next three years
10
38% Very large
(30,000-50,000 sq m)
32% Medium sized
(10,000-30,000 sq m)
30% Small
(below 10,000 sq m)
25% Mega-sheds
(above 50,000 sq m)
26% High number of loading doors
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
% of respondents indicating their floorspace requirements
No size fits all … but big is beautiful
Real estate obsolescence is not as big an issue as many market players fear
11
36%
16%
48%
Required standard of facilities
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
Standard modern general
specifications
Build to suit or specific standards
Both types are needed
Medium term contracts are becoming increasingly the norm
12
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
Less than 3 years
3-5 years 5-7 years 7-10 years More than 10 years n/a
16%
43%
18%
8% 6% 9%
13
But what markets will actually be successful in attracting future real
estate demand?
High emphasis on cost reduction and customer satisfaction will favour locations with excellent connectivity …
14
2.1 Reduce real estate costs
2.4 Reduce transport costs
through location strategy
2.3 Enhance
customer service
Index from 1 = very important to 5 = less important
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
Respondents stating the importance of their company’s business strategy
… in this context, low importance given to multi-modal and port-centric operations is surprising
15
3.6 Enable modal shift locating
at a multi-modal site
3.6 Expand floorspace at a major seaport
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
A contrast to anecdotal evidence seeing rising corporate interest in multi-modality, rail freight and ‘portcentric’ logistics.
Index from 1 = very important to 5 = less important
Respondents stating the importance of their company’s business strategy
16
Q. Do you agree that emphasis on multi-modality, rail freight and
port-centric logistics will increase going forward -
favouring rising occupational demand across locations
providing these attributes?
17
1 Yes, all three will see occupational demand taking-off significantly over the next few years.
2 Yes, at least one out of the three locations will see rising occupational demand over the next few years.
No, none of these locations will gain significant increases in occupational demand over the next few years. 3
18
Q. Which of the three locations
are likely to see the highest occupational
demand?
19
1 Multi-modal sites
2 Major seaports (port-centric logistics)
Sites offering direct rail access 3
20
And how important is the integration of
sustainability measures to logistics
and industrial real estate?
Respondents focus on a narrow set of sustainability measures that offer the highest immediate potential for cost reduction
21
73% Heating energy
reduction 61% Electrical power
reduction 55% On-site waste segregation
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
% of respondents stating the top 3 sustainability measures implemented in existing real estate portfolios
Largely the same sustainability measures will remain the dominant focus for companies over the next 3 years
22
50% Heating energy
reduction 36%
Renewable carbon power generation
59% Electrical power
reduction
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
% of respondents stating the top 3 sustainability measures likely to be integrated in real estate portfolio over the next 3 years
By contrast, companies do not expect to place high importance on mitigation against climate change driven events over the next 3 years
23
16% Overheating
mitigation
5% Reinforcements to roof to cope with extreme weather
16% Flood risk prevention
9% Biodiversity
enhancement measures
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
A limited short-term cost effect?
% of respondents stating the top 3 sustainability measures likely to be integrated in real estate portfolio over the next 3 years
24
Emerging markets
High potential to achieve growth in logistics and
industrial markets drives corporate interest
The same three growth markets came out on top for both logistics and industrial
25
High market potential … but in particular Russia and Turkey present companies with a range of risks and challenges
% logistics / % industrial
Source: JLL 2013 logistics and industrial occupier survey Europe in cooperation with CoreNet Global
1 2 3 Russia 64% / 41% Turkey
48% / 26% Poland 43% / 24%
COPYRIGHT © JONES LANG LASALLE IP, INC. 2014
Thank you
Alexandra Tornow Head of EMEA Logistics & Industrial Research Frankfurt +49 (0)69 2003 1352 [email protected]
Survey methodology Conducted via online questionnaire and through telephone interviews Over 60 respondents from the logistics and industrial sector located in Europe Survey period: Sep – Dec 2013