Adapting to economic trends in real estate

Olaf Margeirsson, Head of Real Estate Research & Strategy – Europe ex DACH discusses how real estate must adapt to economic shifts as there is a growing demand for logistics facilities driven by e-commerce. The European real estate market is shaped by five key factors: debt, deglobalization, demographics, decarbonization, and digitalization. Sectors like life sciences, residential housing, data centers, and energy-efficient buildings are expected to benefit the most. Investors should embrace economic trends rather than stick solely to familiar sectors to prevent to miss out on emerging opportunities.

Real estate is the backbone of the economy, whether on a global or local scale. The economy relies on specific types, quantities and qualities of real estate to facilitate the pro-duction of goods and services we use daily. As the economy changes, so too must the real estate assets that support it.

Real estate investors must accommodate this need with the type, quality and location of said real estate in mind. Focusing on investing in specific real estate sectors reflects an understanding of economic trends and how these investments address the evolving demand for shelter, driven by economic change.

Let’s take an example. In 2012, online retail sales in Europe accounted for approximately 5% of total retail sales. A decade later, this share exceeded 15%.¹ Between 2015 and 2022, ecommerce sales in key Western European markets more than doubled, showing real growth of approximately 8% per year.² Real economic growth in Europe was 1.6% per year during the same period, for comparison.³

At the start of this growth, Europe lacked the necessary logistics facilities to accommodate this ecommerce growth. Buildings were needed – and built they were! According to CBRE, the investible logistics stock in nine major European markets (Belgium, Czechia, France, Germany, Italy, Netherlands, Poland, Spain, UK) grew from less than 200 million square meters in 2012 to more than 380 million square meters today. Despite an average annual accumulated stock expansion of more than 6% in those countries, rents have increased by more than 100% in some markets since 2012.

This rapid expansion of Europe’s logistics sector was a direct response to the changing economy. The real estate industry adapted logically: building high-quality warehouses in the right locations to meet the demands of ecommerce growth.

¹ The Centre for Retail Research, see Online Retail : UK, Europe & N. America : The Centre For Retail Research
² Ibid, plus data from Refinitiv
³ World Bank