Brookfield’s head of European logistics portfolio management, Ben Segelman, discusses the outlook for next year in the sector
Next year is just around the corner, and with inflation and interest rates falling and several large asset portfolios coming to the market, there are strong indicators of a year of optimism ahead. There is evidence of activity ramping up in the market within our own portfolio as occupancy rates are up, driven by tenants looking for quality warehousing and pursuing built-to-suit projects. In recent months, we have seen a demand for spaces that support an optimized supply chain with a particular focus on delivering automation, digitization and sustainability.
With this budding confidence bubbling as we enter the new year, we can expect that 2025 will usher in a new era for European logistics. As the industry changes, businesses will need to prepare for the opportunities ahead, while also understanding the challenges a more active market might bring to secure a steady future for their supply chains.
A year of competition
Supply chains are increasingly being viewed by businesses as a strategic asset as opposed to a background necessity, and more organizations are transforming and revitalizing how they approach logistics. As such, 2025’s favorable conditions are set to spur a shake-up in the movement of goods across the continent. This mass movement for more strategic logistics premises will continue to strain the finite space available in Europe. Combined with the data center boom, fueled by growing demand for AI, competition for ‘connected land’ is going to be fierce.
The jostle for connected land will push rental prices up and increase pressure on local labor markets. To contend with soaring demand, forward planning will become essential. Business decisions today should be made with consideration of their impact 10-20 years down the line. As a result, prioritizing a logistics strategy that is agile and flexible will be paramount to navigating future business needs and quickly changing macro trends.
Resurrecting abandoned projects
With the easing of economic pressure in Europe, projects that were hit by high costs due to inflation in regions like Poland and previously put on hold can be resurrected in the new year. We may therefore see trends that were predicted to take 2024 by storm, like nearshoring, finally have their moment.
While activity is returning to the market, this will bring its own challenges and success will require the ability to keep up with an evolving industry. Prioritizing automation, digitization and sustainability will be key solutions for this across the supply chain – from sourcing to fulfilment.
The changing role of the landlord
As land acquisition becomes increasingly challenging, the role of the landlord will need to shift. They won’t simply rent land to tenants but will become valuable strategic partners in the acquisition, development and operations processes. Businesses will be able to tap into asset managers’ local knowledge to unlock access to land banks, allowing them to find premises that accelerate logistics strategies.
The move to campus
Location is an integral aspect when making smart logistics infrastructure choices and having efficient, low-carbon transport routes is a top priority for many businesses. Sites located near well-connected distribution routes, such as highways, airports and waterways, are becoming very scarce. On top of this, logistics premises with good commuting links and accessible amenities are key for attracting and retaining employees and crucial for addressing the talent crisis.
The result of this will be a move toward multi-purpose logistics parks in which multiple companies can share infrastructure and facilities. This will have the added benefit of supporting sustainability initiatives for companies in 2025, as tenants can share resources like energy grids, electric vehicle charging stations and solar panels.
The rise of built-to-suit
To contend with changing industry conditions, businesses need premises that can stand up to modern demands, so built-to-suit projects will be a prominent feature of 2025. Tailored buildings will enable businesses to bake the growth drivers of automation, digitization and sustainability into the foundations of their operations. They can ensure their warehouses have the right specs to support automated processes and sustainability features such as solar panels, which can be difficult to retrofit into existing buildings and ensure their supply networks are futureproofed.
Long-term thinking in 2025
Returning confidence is laying a dynamic playing field for logistics premises in Europe in 2025. For those looking to gain an edge next year, forward-thinking is the name of the game as decisions made this year will affect supply chain strategies for years to come. Those who pay attention to building a robust and resilient supply chain by working collaboratively with local partners will best set themselves up for success in the new year.