2020 is going to be remembered not just as the year of the pandemic, but also the year when e-commerce crossed the chasm from niche to mainstream, the industrial and logistics segment seems to be the star of the real estate segment right now.
By Anda Sebesi
The pandemic has placed the industrial and logistics segment into the spotlight, as it was among the business sectors that were generally less affected in the short-term and were even expected to benefit in the medium and long run from the structural shifts brought about by the health crisis. “The pandemic has shown us that the industrial-logistics sector is an essential cog in the machine that makes our modern society work,” says Sinziana Pardhan, managing director for Romania at P3 Logistic Parks. Yet, she adds, the main problem of the sector since the beginning of the pandemic has been the lack of predictability in terms of volumes. “Over the past nine months, we’ve seen some large companies expanding their operations, while smaller ones hesitated on their growth or relocation plans,” she explains.
In turn, Ana Dumitrache, Romania country head at CTP, says that if we were to draw a line, the positive effects would be more visible than the negative ones. “It’s all been about the growth of e-commerce, new players entering the market more rapidly than before, and existing clients expanding in order to better handle online orders,” she says.
At the end of the third quarter of 2020, Romania’s modern industrial stock had reached 4.84 million sqm, with 45 percent of the total located in Bucharest, according to CBRE. New supply delivered since the beginning of the year accounts for 389,000 sqm. Moreover, during the fourth quarter of the year, 260,000 sqm are scheduled to be added to the modern industrial stock, while another 246,000 sqm are expected to be delivered by Q3 2021.
With Q4 looking like it’s going to be a strong quarter as well, the expectation is that 2020 will be a record year in terms of industrial demand. As CBRE says, demand will continue to come from retailers in general, and especially from food retailers, generated by the need for new regional hubs, the increase of the controlled temperature surface, and the degree of integration in logistics platforms. “The current integration average for the top 10 food retailers is about 60 percent. An integration of 80 percent, which is targeted by most players, will lead the volume of logistics spaces for retailers to increase by at least 50 percent. Although we’ll see an increasing number of transactions in the non-food area, we still expect large transactions from FMCG companies in different areas of the country,” said Andrei Jerca, Head of Industrial Services at CBRE Romania.
A promising future
CBRE expects high demand for logistics premises in the coming years, and a couple of factors will contribute to maintaining it: the crossing of the 10 percent threshold for the share of e-commerce in total retail sales in Romania – which is expected to happen in 2020 – together with an upward e-commerce trend in the coming years, and the further development of modern grocery store networks, both of which will be combined with the general economic growth predicted for 2021-2022.
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“Given retailers’ need to efficiently address distribution costs and delivery times, we estimate that Bucharest will attract the main share of future deliveries, while we’ll see a need for in-city logistics and last miles in both Bucharest and Cluj-Napoca. There are also several cities with limited or even non-existent developments that will turn into new points of interest for tenants and developers: Constanta, Iasi, Craiova, and Bacau. CBRE calculations indicate an increase in the stock of industrial spaces of over 50 percent in the next 5 years, up to 8 million sqm,” Jerca explains.
Experts say that e-commerce will continue to be a driving force for the industrial and logistics sector in the coming years. “It will definitely drive demand next year, but so will last mile delivery-type operations. Our clients need to be closer to their own customers in order to dispatch in a timely manner, while infrastructure is not progressing quickly enough to cover the gap. Players who have only been shipping from Czech or Polish warehouses will be establishing facilities here to get closer not just to Romanians, but also to the larger Balkans area and even Turkey,” Dumitrache argues.
Photo: ctPark Bucharest West