Future of retail to include skyscraper warehouses, super ports and showrooming, says first ever European Retail & Logistics report

LONDON, November 26, 2015 – With spare space logistics space in European cities at all time low and growth in online shopping at an all time high, massive warehouse space has become a crucial part of supporting modern life.

A major new report from Colliers International lists six predictions for the sector. It says that multi-storey warehouses, deep-sea ports and fewer, bigger shops will make up the future of retail as millions more shoppers head online around the world.

 The report also suggests drones may be grounded because of rising property costs and airspace regulations.

 In ‘European Retail & Logistics Insights: From Sheds to Shelves’ Colliers International, the NASDQ-listed global property company, opens the bonnet on the first and last mile of products’ journeys from sheds to shelves.

 “We’ve seen seismic change in consumer behaviour collide with the biggest recession on record and the market is now playing catch-up,” said Damian Harrington, head of EMEA research at Colliers International.

 The report has highlighted six key predictions for the years ahead.

 Super-sized warehouses: Soaring land costs mean developers will find more floor space on a site by building upwards. Prime warehouse assets have enjoyed significant yield compression in recent years. Companies like Next, River Island and John Lewis already rent millions of square foot of storage space. Being able to store closer to people’s homes could streamline deliveries further and allow retailers to better use their supply chains and retail outlets as pick-up locations. In Japan, ProLogis Parc Narita III is a 661,000 sq ft (61,400-sq meters) giant industrial facility spread over seven floors. Europe could soon get its own skyscraper sheds.

 Deep water ports:Container vessels hold more than 25 times as much cargo compared with 1970 and ports have had to evolve to make room. Global logistics and shipping industries have evolved to capture and facilitate growth in trade. This is why deep water ports are now a necessity. Their emergence across Europe has seen trade through the Mediterranean soar as new shipping routes have grown. The continent remains far more fragmented than Asia.

 Digital urbanites unite and take over: Research shows that urban-based, digitally-literate consumers will dominate countries’ populations over the next two decades having a profound impact on how retail is shaped and delivered. While Europe itself will see comparatively modest growth, a surge across China and India will create huge opportunities for existing retailers who have the benefit of established infrastructure and brands which often attract emerging market consumers.

 Drones could stay grounded:Despite the buzz around drone deliveries current airspace regulations could keep drones grounded. Instead, retailers could make better use of existing last mile delivery methods such as pedal bikes and Uber taxis. The practicality of flying DVD box sets to people in high rise buildings doesn’t stack up – unless office blocks place post collection shoots on their roofs. And then there’s the cost. While paid services like Amazon Prime offer free delivery, they often only do so on costlier products. Although time-conscious consumers want everything tomorrow, some may begin to wait a little longer for less urgent items if they realise just how much they can save. Plus, with increasing concern over the environment, bicycle couriers or electric cars could well become a totem for sustainably minded retailers.

 Show rooming pays: “Show rooming” is jargon for when shoppers look but don’t buy, or snap a product up online instead. This has been one of the drivers or companies reducing retail space and shifting capacity to more cheaply priced warehouses, which can deliver straight to people’s homes. However, smarter retailers will use technology – such as augmented reality, 3D printing and biometrics – to turn more of a profit from the theatre of real world retail. Offering unique experiences, bespoke products and additional offers can help build balance sheets and brand value.

 Retailers like Zara, John Lewis, H&M and Marks & Spencer are increasingly merging online and offline shopping facilities. They have larger retail stores and even bigger warehouse facilities to fulfill in-store or online orders.

 “Retailing patterns have changed but the sector is resilient. Many high streets will focus much more on leisure together with in-store collection which could be a good way of re-using redundant space as pick up points,” explained James Watson, head of retail investment at Colliers International.

 With mobile shopping rising across the globe, retailers will increasingly shift capacity from the high street to warehouses to save money on rent and so they can send things quicker to customers. Supersized container ships will enhance economies of scale but require new deep water ports and bigger distribution centres, since a lot of goods were previously held in retail stores.

 Colliers has analysed data across different markets to highlight demographic trends and rent changes which often drive how much space retailers take. It says returns from warehouses have outpaced retail, but that key regional shopping centres will continue to perform well.

 “A lot of retailers still want the showroom on the high street and indeed some online retailers have specifically opened shops, like Amazon in Seattle. Over time, some districts will inevitably fall out of retail use altogether,” said Damian Harrington, head of EMEA research at Colliers International.