BrazilThe rise of mega distribution centers in Germany and Benelux
Rapid growth in ecommerce and global trade in recent years is causing the Germany, the Netherlands and Belgium to witness a boom in the number of mega distribution centres – logistics warehouses larger than 40,000 square metres.
These centres store items that are en route to delivery or being returned to traders, and are crucial to sustaining a growing ecommerce landscape. To be noted is that they need to be strategically placed to escape urban congestion, while also benefiting from city labour. As a result, upon discovering such a location, most investors opt to go big with their distribution centres.
Analysis from consulting firm Buck Consultants International (BCI) reveals that the number of mega distribution centres across Germany, the Netherlands and Belgium combined jumped by nearly 60% between 2018 and 2019 – when compared with the 2015-2017 period.
Germany dominates, currently home to more than 140 mega centres. The country also saw healthy growth of 50% in these numbers in the 2018-2019 period. That being said, the Netherlands is the feature story when it comes to growth, with a 100% jump over the same period from 30 to 60 centres. Belgium is home to 17 centres, showing no signs of growth last year.
According to Buck Consultants International, several factors have played out to cause a boom in warehousing demand. As mentioned, a thriving ecommerce landscape is key. “The e-commerce sector is growing enormously and enjoys a growing popularity. However, the various products, which are to arrive at the end customer within the shortest possible time, require physical storage space and the possibility of fast and smart processing, which are offered to them in fulfilment centers,” explained BCI partner Kees Verweij.
Underlying this trend is Europe’s good economic health in recent years, which paved the way for high consumer demand and facilitated commercial exchange. A healthy Europe has also expanded its international trade profile, which means traders from the US and Asia are seeking warehousing options on the continent. Easing this mix of factors is a friendly interest rate in Europe, keeping warehousing investments attractive for local and global players.
Last among the factors – perhaps the most immediate and expansive in its influence – is the Covid-19 crisis and its impact on consumer behaviour. An already vibrant ecommerce landscape is now sustaining most retail activity across the world – from groceries and medicines to electronics and luxury goods.
No doubt, the crisis has been an ordeal for the logistics sector, particularly in light of global supply chain disruptions. At the same time, mega distribution centres are among the assets that can add stability and value amid the chaos, offering a smart and secure storage space while unprecedented delivery volumes are being coordinated.
As demand for these centres continue to rise, Verweij predicts tough times ahead for investors. “A high level of competition for building land – especially in the major cities – means that compromises have to be made in the choice of location in many places. The search for a stable location for the future is therefore a complex undertaking for which there is no single solution.”
