Logistic real estate still delivers the goods despite corona challenges

"At the heart of this growing demand lies a surge in online shopping, spurred on by the corona crisis," explains Nicolai Soltau, Fund Manager Logistics, Europe at PATRIZIA. Even the elderly and other latecomers to the Internet shifted to online shopping out of necessity during recent lockdowns. As a result, e-commerce sales accounted for 18% of all retail sales worldwide in 2020. In some countries the numbers were even higher – in the UK, for instance, the online penetration rate reached 25%.

The trend for online shopping is set to continue, with online sales predicted to account for 21.8% of all retail sales by 2020, as the corona crisis fundamentally changes the way we live, work and shop.

Not only does today’s consumer buy more online, they also want it delivered faster – often demanding overnight delivery. And they’re less happy with their purchases: online shoppers are three times more likely to return goods purchased online than those bought at a physical store.

Modern logistics is far more inextricably intertwined with retail than with previous industry drivers, such as manufacturing and trade. This means that permanent shifts in consumer behaviour translate into far-reaching changes for logistics. For example, only orders require up to three times more space than traditional retail to fulfil, according to the World Economic Forum (WEF) in a report about the future of real estate.

For starters, all inventory is stored in a warehouse. Plus, parcel shipping requires more space than shipping pallets. Finally, more volatile sales mean more inventory is required. In addition, reverse logistics (the ‘reverse movement’ of goods from the consumer to the manufacturer for recycling) calls for up to 20% more space and labour capacity compared with forward logistics.

Equally, traditional stores are striving to meet the same demands for convenience, reliability and product variety as offered by their online rivals. Options to buy online and pick-up in-store are set to place pressure on store inventories, calling for a rapid replenishment operation close by to keep shelves stocked.

Some innovative real estate developers and investors are devising creative concepts. One trend is for retailers to combine logistics with bricks-and-mortar shops, says Soltau. In Hamburg, for example, Bonprix, a subsidiary of Germany’s Otto Group has created a small shop that only displays one sample of each item in its catalogue. Customers select the item that they want to try on and this is waiting for them in the fitting room. Alternatively, they order the merchandise online and then simply pick it up in the store. 

To learn more about the market, download the PATRIZIA report, The future of logistics: 7 distinct trends to watch.