East Europe may hold plenty of promise for developers of speculative logistics sites, but the risks are considerable. True, manufacturing is pushing East, fast on the heels of cheaper labour. And yes, rewards can be high if you get it right. Yet, getting the right location on a speculative venture can raise more than a few beads of sweat on the developer’s brow.
Perceived wisdom suggests a more prudent strategy on Eastern Europe, following clients on specific ventures, rather than taking the risk of guessing correctly.
Developers seem far more keen on taking a more measured approach to future investment, looking closer at lower yield developments in the west as a safer bet. In particular, ports are seen as a safe-haven, with Gazeley placing ports and ship canals at the heart of their development strategy, concentrating on Southern Europe. In a similar vein ProLogis is focusing on ports in the North.
You don’t have to look far for the reasons for this strategy. According to a new report by analysts, Frost & Sullivan, the ‘Motorways of the Sea’ initiative proposed by the EU could offer significant opportunities for investors and occupiers.
The report suggests that an expected 38 per cent increase in EU25 trade by 2010 will lead to a shift in the mode of transport used for the transportation of goods between countries. The use of ports and sea highways will become fundamental in terms of cost and time saving. Belgium, along with the Netherlands, is considered the gateway of Europe and should benefit from growing traffic. France, especially La Havre and Marseille, will grow in importance as logistics locations. In particular, ports in Southern Europe are expected to thrive thanks to rising imports from China.
So, whereas, the rewards may not be as spectacular investing in the west, as opposed to the east, the risks associated with port developments are far more in-keeping with current corporate courage at the big developers.
These issues will be discussed in depth at the Logistics of Location property conference taking place on the 23rd May at the prestigious Millennium Hotel, Mayfair, London. Further information can be obtained at www.supplychainb.com
Nick Allen, Editor