According to Savills’ latest research, Europe will see an additional 11.6 million sqm of warehouse demand due to the manufacturing sector by the end of 2022, based on Capital Economics forecasts data.
Take-up in the European manufacturing sector has grown significantly over recent years, rising from 2 million sqm in 2012 to 4 million sqm in 2019, according to the international real estate advisor. Even though take-up is expected to be slightly lower in 2020, it is still anticipated to surpass 4 million sqm in 2021 again and then continue to rise-
The European manufacturing sector accounts for the same proportion of logistics take-up as in the UK at 14%. However, given this European take-up figure varies by country, with higher proportions of take-up across Central and Eastern Europe ranging from 35% in the Czech Republic to 14% in Poland, this suggests that the demand forecasts for Europe could be conservative and higher than the 11.6 million sqm predicted for the end of 2022.
Chris LaRue, director-head of industrial agency at Savills CZ&SK, says: “In this sense, the Czech Republic continues to benefit from the high concentration of automotive suppliers, especially when we look at net take-up figures. Considering the last 5 years, on average 50% of the industrial space which was leased by production companies was taken up by tenants associated with the automotive sector.”
Mike Barnes, European Research Associate at Savills, says: “If in the short term, companies adopt nearshoring policies to insulate themselves from future supply chain disruption, it is likely that European manufacturing will increase, which in turn will create a ripple effect for warehouse demand. If the forecasts from Capital Economics are just 20% higher, then an additional 13.9 million sqm of traditional warehouse space will be required across Europe by 2022.”
According to the Institute for Supply Management’s (ISM) July survey, 20% of firms are planning or have already begun to reshore or nearshore some operations, whilst 27% will reduce headcount. One of the challenges for Europe’s manufacturers looking to nearshore is the shortage of available logistics space. Developers have become more risk-averse and the numbers of speculative announcements are likely to be tapered throughout 2020-21.
Lenka Pechová, Senior Research Analyst at Savills CZ&SK, comments: “According to the Savills Nearshoring Index released in July 2020, the countries that offer greatest nearshoring potential in Europe are concentrated in Central and Eastern Europe, thanks to lower input costs and direct road and rail links to the major Western European consumer markets. The Czech Republic is in 5th place of most attractive nearshoring destinations in Europe, supported by excellent infrastructure, favourable input costs and an established manufacturing economy for export. Given the low levels of automation in the manufacturing sector, labour availability will also play a crucial role.”
