Belgium tops European industrial/logistics ranking
20 Feb, 2006, Brussels
Belgium comes top in a ranking of the best countries in Europe to locate a distribution or logistics centre, according to the European Distribution Report, published by Cushman & Wakefield Healey & Baker (C&W/H&B).
When considering a range of cost, access and property factors, Belgium retains its title since the last report. Belgium's strengths are its low rents and good accessibility. In second place, comes France, which has lower building costs and land prices than Belgium and scores well in terms of property and market size, followed by The Netherlands, where there has been a relative improvement in cost competitiveness.
The Central European locations have all moved up the ranking; Czech Republic to 4th place, Poland to 5th and Hungary to 7th. "The expansion of Central Europe's industrial and logistics sectors has put an eastern 'stretch' in Europe's distribution 'banana'," says Nigel Rowe, C&W/H&B's Head of European Industrial & Logistics.
Ferdinand Hlobil, C&W/H&B's Regional Head of Central European Industrial & Logistics, adds: "European Union membership in 2004 has given a huge push to the Czech Republic, Hungary and Poland. These countries are benefiting from the continuing move of European production from Western Europe and the expansion of the region's logistics markets, helped by the region's low costs compared with Western Europe, the growth of the retail sector in these new member countries and their improving transport networks."
In terms of individual factors, Poland has the lowest property costs, Russia the lowest labour costs, Belgium the best access, the UK the largest freight market and Austria the best land/property supply ratio.
Industrial/logistics rises up the business agenda:
The 'cost' focus has shifted to transportation (time and cost), labour (wages, availability and hidden social costs), communication (software and systems) and process management of the goods themselves, the report explains. "The decision of where to locate production and logistics capabilities has moved up from just resting with the real estate team to become part of a company’s core business strategy," says Nigel.
This is against a background of:
The industrial/logistics property market is being driven by investors, says Nigel: "Investors will consider almost any market or location provided that units are let for a significant period to a good tenant." This is pushing down yields across Europe, in particular in France, Poland and Denmark.
Shortage of prime space for occupiers:
Supply of prime space is very tight across both Western and Central Europe as occupiers look to upgrade or move to modern, cost effective space. In Central Europe, this has increasingly turned occupiers to locate in secondary cities and transport hubs because of a lack of suitable space in the main cities.
Rents have now bottomed out:
Rental levels in Central Europe have been decreasing, but the perception now is that the market has bottomed out, says Nigel, while in Western Europe the market is largely static with signs of growth in certain areas, such as Amsterdam, Milan and Moscow.
Looking ahead – smaller centres and the Balkans:
The trend has continued towards 'hub-and-spoke style' regional distribution centres, particularly in Central Europe. But, says Nigel, this could well change: "Rising fuel costs, worsening traffic congestion and new technology allowing for centralised coordination could well reverse this, leading to smaller, more national or local distribution centres."
In terms of geographical expansion, logistics corridors are beginning to stretch down from Central Europe to reach Romania and Bulgaria, both expected to join the EU in 2007, and to Istanbul, with Turkey having started negotiations to join the EU in 2005. "Europe's distribution market will continue to expand with the increasing sophistication of supply chain management and the outward push of the eastern frontiers of the European Union," says Nigel.