News Article e-commerce logistics Savills warehouse
by Property Forum | Industrial

According to a recent report from Savills, an additional 8.6 million sqm of warehouse space is required by parcel companies in Europe between 2021 and 2025 to keep up with growing e-commerce demand.

Data analysed by the international real estate advisor shows that, based on a report from Effigy Consulting, a total of 12.3 billion parcels were delivered in Europe during 2019. Applying data from OFCOM’s parcel delivery, which shows an annualised growth of 9.1% in the number of UK parcels, the next five years in Europe will require a significant development pipeline.

Assuming that 20% of goods bought online are returned over this period, an estimated 1.7 million sqm of this space will be required to accommodate and process returns from parcel delivery companies. Rather than a like-for-like relationship between parcel returns and logistics demand, this is more likely to be in the form of a ripple effect for new demand from associated trading partners.

Mike Barnes, Associate, European Research, Savills, commented: “We have seen a huge surge in online shopping over the course of 2020, fuelled largely by the impact of the Covid-19 pandemic. While we anticipate retailers’ omnichannel strategies will become more streamlined in order to reduce the number of returns, it’s clear that the level of demand for warehouse space used for both new stock and returns will be significant.”

Savills also notes that across Europe, there are slightly varying operations from country-to-country when it comes to coping with eCommerce returns. While the UK is furthest ahead, which is in line with the level of e-commerce penetration (28% in 2020), notably in The Netherlands, third party logistics operators (3PLs) are introducing new measures to improve the ease of returning goods and faster process inbound returns. In Poland, major retailers such as Zalando are widening their net of potential warehouse locations in order to service both domestic buyers as well as the neighbouring countries.

Marcus de Minckwitz, Director, Regional Investment Advisory EMEA, Savills, added: “We do not see any abating in the speed at which retailers are expanding their warehouse provisions – especially taking into consideration the number of returns. What will be interesting to see is whether, when retail stores reopen post-lockdown, retailers will manipulate them for use as returns hubs meaning a shift in the role of the store as a purchase point. What is clear is that there is no one-size-fits-all solution to returning goods as consumers prioritise convenience and retailers and parcel delivery companies accommodate these changing preferences in their warehouse layouts.”