One of the fastest growing sectors in the real estate world in recent years, especially since the outbreak of the corona virus, is the logistics sector.
The most sought-after areas in logistics real estate around the world are found among airports and seaports.
Logistics centers have become a “demanded product” among huge international companies.
What are logistics centers?
The logistics centers, or as they are known by those in the know, the “marlogs”, are the hottest sector in the real estate world. Before the age of the world, the global village, stores were physical businesses that sold to customers who came to them. Today, in the age of online shopping, when every business, big or small, can offer its products to every customer, anywhere in the world, logistics centers have become synonymous with success and business efficiency.
In recent years, a significant transition has been made from local production to imports. As a result, the importers are the main consumers of the logistics centers, when goods arriving from the port or airport need storage space on the way to the end customer. In addition, there are a significant number of companies that provide goods storage and distribution services for those importers who do not want (or whose marlog is too narrow to contain) to manage the storage and distribution of their goods (these companies are TPL – Third Party Logistics).
If we simplify the matter, the goods route is like this:
Receiving the cargo at the port (sea port or airport) –
Sending the cargo to the MRL –
Arranging the goods on top of the shelf inside the logistics center –
Distribution of goods to customers –
Many manufacturing and industrial companies own one or more logistics centers for the purpose of storing raw materials or parts and finished products. Retail companies also rely on logistics centers in light of the strengthening of the online shopping sector, especially since the outbreak of the Corona virus.
In the bottom line, more and more organizations understand the importance of proper management of the logistics centers and prefer to stay away from the big cities and establish centers in designated places such as parks or industrial areas. The geographic location of the MarloG will always be close to airports, seaports, main roads, etc.
The logistics sector in the aspect of real estate
Huge companies invest tens of millions of dollars in the establishment of logistics centers (logistics centers), with investment in both the location and size of the logistics center and the technology that will manage the inventory stored there. The field of purchasing, renting, managing and maintaining logistics centers has been on a steep rise for several years, when the proper operation of a logistics center reduces transportation and transport expenses, enables fast shipping of products and packages, reduces the rate of human error in inventory management (sometimes this is a significant saving), and enables Convenient, automatic, and cheaper storage of products and raw materials.
In order to establish a logistics center in areas of demand, comprehensive tests must be carried out and many factors that can influence the choice of location must be taken into account.
Below are some of the important and main variables:
The logistics center should be located in an area that has convenient transportation and access routes to it in order to enable the transportation of the goods, their unloading and then loading and shipping.
The logistics center should be established in a large and extensive area in order to have room for the storage of the goods (recently the storage on the floors above the ground level has developed greatly in order to reduce costs).
It is desirable that the logistics center be near an airport or seaport in order to shorten the arrival and departure times from it.
The selection of the location of the Marlog – the optimal logistics distribution center is critical to the efficient management of a modern supply chain, especially considering the disruptions in production and shipping caused by the Corona virus and the growing demand for deliveries and the rapid delivery of goods and services. More and more companies and businesses realize that smart management of their warehouses – reduces in operating costs and enables efficient, fast and error-free delivery, and higher profits for the business. This issue is extremely important and acute for the operational and financial success of manufacturers and companies in the economy.
Increase in demand for logistics centers around the world
The central role of logistics in world trade makes logistics real estate a particularly attractive field.
The transition to online purchases has made transportation and storage critical in global trade.
E-commerce sales increased significantly with the start of the Corona virus and reached a rate of 21.6% of total retail sales in the second quarter of 2020, an increase from 16.2% in the previous quarter.
Logistics and distribution is one of the leading industries today in rents and yielding properties – the occupancy rates in logistics warehouses are rising rapidly and as a result, the rental prices as well. This fact raises the demand for logistics assets. The best investments in such industrial buildings are in areas that are not yet attractive – or in other words, those that have not yet realized their full potential. This is the time to invest in such locations, especially when there are local development plans that will increase the attractiveness of the place and the demand and lead to an increase in the value of the property and the rents that can be charged for it.
As a result of the increasing demand, many logistics centers are being built in different locations around the world, which makes the field even more challenging.
The expectation is that industrial real estate will continue and remain a “hot market” in 2023 as well.
The logistics sector in England (Q1, 2022)
1. In the first quarter of 2022, approximately one million square meters of logistics space was leased in England. A 100% increase compared to the first quarter of 2021.
2. The vacancy rate was about one and a half percent, which indicates a great demand for logistics areas.
3. The transaction value of logistics areas sold in England in the 1st quarter of 2022 increased by 9.9% from last year to a value of 3.2 billion pounds.
4. The rental prices of logistics spaces in England increased by 33% from last year.
5. 47% of the purchase transactions of logistics areas in England were carried out by Private Equity companies such as SDB.
The logistics sector in the USA (Q2, 2022)
During the second quarter of 2022, the field of logistics in the USA shows high demand:
1. The increased competition in the world of logistics caused an increase in rents by about 21%, which currently places the rent in the range of $8 per SQF, which is the highest recorded to date.
2. The vacancy rate is about 3.4%, which indicates a great demand for logistics areas in the USA.
3. The logistics market remains active with approximately 139 million SQF in deals signed this quarter.
4. The number of transactions increased by about 5.7% compared to the 2nd quarter of 2021.
