Growth in e-commerce: extra 1.2 million sq. m. of logistics space needed by 2025

Growth in e-commerce continues to rise. By 2025, 26.4% of all retail sales are expected to be via the internet. In 2020, that figure was 17.8%: an increase of 8.6 percentage points. This will have an impact on the demand for logistics property. In the years ahead, an additional 1.2 million sq. m. of logistics space will be needed in order to cope with the growth, according to calculations by the international real estate advisor CBRE in its Global E-Commerce Outlook. The impact on investments in logistics property is already visible: in the last two quarters, investments reached 1.8 billion euros, a new record.

Extra 1.2 million sq. m. of logistics space needed

According to calculations by CBRE, an additional 1.2 million sq. m. of logistics space will be needed in the Netherlands. “An increase of a billion euros in the number of internet sales roughly translates into demand for 110,000 sq. m. of logistics space. In 2020, e-commerce in the Netherlands was worth 19.7 billion euros. In the years ahead, this is expected to increase by 10.8 billion euros, which means that around 1.2 million additional sq. m. of logistics space will be needed,” explains Melissa Verhoef, Senior Research Analyst at CBRE.

Challenge for construction

“There’s no shortage of capital or desire to invest in new buildings or the renovation of logistics property,” says Jim Orsel, Director Industrial & Logistics at CBRE. “Despite that, this presents a huge challenge for developers, investors and local authorities in meeting demand. Potential problems include planning issues in terms of permitted use and the shortage of space, power capacity, nitrogen standards and other sustainability requirements that are becoming increasingly strict. In practice, we expect this to result in more, small-scale logistics space close to urban centres, to enable products to be delivered as efficiently as possible using electric vehicles. There will also be an increased need for larger and more modern factory space, as working processes become increasingly automated.”

Higher rents

“We are already seeing the increased demand reflected in rising prices and rents,” says Orsel. “Rents are increasing in all price categories and we expect this trend to continue in the years ahead in all parts of the Netherlands. We’re also seeing a reduction in lease incentives, which is often a sign that rents are increasing.”

Record investments in logistics property

Since April 2020, there has been a structural increase in the number of online sales as a result of the pandemic. This is reflected in the logistics property market, which proved to be one of the strong sectors during the pandemic. The investment volume grew by 64% from 2.5 billion euros in 2019 to reach 4 billion euros in 2020, a record for this sector. In the first half of 2021, the investment volume achieved another new record of 1.8 billion euros – a 16.8% increase year-on-year. The investment volume for the whole of 2021 is expected to be around four billion euros.

Key factors in e-commerce growth

The report’s predictions are based on findings in 43 countries, with each country being assessed in terms of the presence of 27 so-called e-commerce drivers relating to demographics, culture, internet use and digital infrastructure. The six key factors:

• the percentage of the population;
• the digital skills of the population;
• mobile internet sales ratio;
• debit and credit card use;
• the presence of a dominant e-commerce player;
• fixed broadband subscription / population.