More and more British companies use the services of logistics providers that take over the functions of transportation and storage of goods. Demand for 3PL (Third Party Logistics) services will grow to 40% in 2022, Colliers reports. Experts explain this with economic uncertainty, which forces businesses to look for different ways to save money. Cooperation with logistics providers allows you to reduce the pressure on business and save on the organization of internal processes. Typically, 3PL companies perform the following duties:
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Transportation and responsible storage of cargo;
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Packaging and labeling;
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Order processing and shipping.
The increase in demand for 3PL services is due to online commerce, which is growing, regardless of rising inflation and interest rates. This process affects the entire segment of commercial real estate. Investors are increasingly paying attention to logistics facilities. In 2022, there was an increase in investments in warehouses with an area of more than 300,000 sq. ft. Only in the first half of this year, 24 million sq. ft. of logistics space were purchased.
The head of logistics and industry at Colliers, Len Rosso, says that the activity of 3PL operators leads to the refusal of retailers to buy their own warehouses. In the first half of 2022, online store owners purchased only 13.6% of the total area of real estate offered. In 2021, retailers are believed to have taken over 50% of the market space. Even Amazon, which last year purchased a third of the total volume of warehouse space, chose space for rent in 2022. Thus, a reliable base of tenants appears in the commercial real estate market of Britain.
Logistics facilities are the most promising investment tool
Over the past 5 years, the most profitable investment segments have been office space and entertainment centers with a large area for shops. The coronavirus pandemic has changed the situation, forcing businesses to close offices and work remotely. Retailers are also moving to online sales by creating online stores. Under these conditions, logistics facilities have become the most attractive sector for investment, says investor and financier Dmitry Leus.
In 2022, it is especially noticeable that the demand for logistics facilities significantly exceeds the demand. In the first half of the year, 19 million sq.ft. were available on the British market, which is 20% less than in 2021. At the same time, demand is actively growing, because businesses are looking for newer and better equipped logistics complexes. Many companies rent only those premises that meet the requirements of their ESG environmental policy. All these factors indicate that the tension in the logistics real estate market will increase. Investors should pay attention to the available areas on the market, as well as to projects for the construction of new facilities.
Owning a logistics facility will protect assets from rising inflation and generate rental income. Andrea Ferranti notes significant rent growth in the warehouse segment. Britain’s industrial assets showed growth of 6% in the first half of this year. Properties located closest to London increased in value by 9%. Until the end of the year, there will be a shortage of logistics space, so the cost of rent will increase. The greatest growth is predicted for premium facilities that are leased by large 3PL companies. They, according to experts, are becoming more expensive by 12%.
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