Best Brands Practice


Development logistics centres on brownfield sites is one of solving space shortages

Is There Really No Space Left?

Real property is not an end in itself but serves the execution of logistics processes. Land suitable for this has been subject to persistently strong demand and in permanently short supply. The associated take-up in Germany grew from around 4.0 million sqm in 2010 to 6.6 million sqm by 2020. Of course, the steady growth of e-commerce significantly contributes to its increase and is likely to even gain more pace. But the bread-and-butter business of the logistics sector is also generating keen demand. It reflects the shift toward Industry 4.0 and the general trend to outsource certain value-chain elements in manufacturing to logistics. The world after COVID-19 is not likely to bring any fundamental shift in floor space demand in the logistics sector. On the contrary: Industrial production is already back up to speed. Important sectors like the automotive industry have self-confidently embraced the structural challenges of the future.

Over the past years, the building activity has also more than doubled (from 2.1 million sqm in 2010 to 4.7 million sqm in 2020) but still trails the strong demand because it is more or less capped at around 5 million sqm in annual completions only. Future space requirements are projected at 6 to 7 million of effective floor area per year. The gap between the net increase in completions and the market absorption as sum total of lettings and owner-occupier take-up has been widening for years.

Increasingly Dire Shortage in Available Land

Logistics developments require sites that meet specific needs. Not every piece of land does. An industrial zone permitting around-the-clock operation seven days a week (24/7) without noise constraints would be ideal. Operators favour motorway access, ideally in direct proximity to a motorway slip road and with no residential area nearby.

Keen demand, however, is making suitable sites increasingly hard to find. Less and less land is zoned for this purpose and the approval and planning processes are marked by obstacles. Far from incidental, these hurdles result from regulatory constraints on further soil sealing. While Germany will slow its soil sealing rate from currently around 63 hectares/day to 30 hectares/day by 2030, the EU Commission has gone even further: Soil sealing is supposed to drop to net zero by 2050. None of this will help to alleviate the land shortage within the foreseeable future.

Given these assumptions, is there any way to meet the space requirements? The answer could be affirmative if stakeholders dare to try new approaches and strategies. Here are two of several possible measures

Measure #1 – Brownfields

The strategy of recycling pre-used or obsolete sites is hardly new. But never before has the brownfield strategy been embraced by so many market players. The former focus on industrial and railway sites has lately been expanded to include defunct open-pit mines, quarries, landfills and military conversion areas as well. Eligible in urban areas are moreover decommissioned leisure and cultural venues as well as disused municipal infrastructure. If the home-office model is adopted on a large scale, office vacancies could rebound and provide at least some possible sites. Similarly, retail assets under pressure from e-commerce become a source of urban brownfield sites.

The total stock of brownfield land in Germany is estimated at around 150,000 hectares, offering plenty of potential to ease the strain. But a closer look will quickly reveal that detailed information is often missing. It would be extremely helpful if market players had access to comprehensive public land records to speed up the process of identifying suitable sites.

Moreover, it can be quite difficult to recycle brownfield sites. On the one hand, they tend to be contaminated (pollutants, ordnance, etc.). On the other hand, such sites often contain massive structures above or below ground. Either scenario calls for thorough decontamination and demolition. For the stakeholders, they are not only rather costly but also risky and time-consuming. Providing substantial support in the related planning, approval and funding processes would be helpful.

While brownfields can provide significant relief to floor space shortages, they are not always the answer. After all, they are not available everywhere.

Measure #2 – A New Mindset Among All Stakeholders

In addition to the above measures, a change in attitude is often called for: Many stakeholders should adopt a new mindset regarding logistics. According to a common stereotype, the logistics business creates no jobs and merely consumes land. Municipalities prefer to wait for a “white knight” in the shape of a manufacturing business. However: The time of large industrial and production plants has come and gone. Under the Industry 4.0 paradigm, labour productivity is enhanced by deploying efficient, compact and smart machinery while space requirements decline. Certain sections of the value chain are outsourced, including to logistics service providers. It is here, then, that valuable jobs are created. Word may not have got around that logistics has become a high-tech industry and is not the same as warehousing. Organising an interest group for residential real estate seems easy enough to do in Germany. But you will look in vain for a logistics alliance. This needs to change, and the change presupposes a fresh mindset.

Is There Really No Space Left?

The supply in land available for industrial-commercial use is admittedly contracting. But to say we have run out of land would be misleading. Rather, we need to think of new ways to find or create available plots of land. This will necessitate a coordinated effort by all stakeholders.

More details and measures on the subject are available


Tobias Kassner

Head of Research