Dealing with the Migration to Cheaper Locations; LOGISTICS A Profound Shift in the Structure of Global Industrial and Logistics Markets Is Underway. Simon Lloyd, Birmingham-Based Head of DTZ's European Distribution and Logistics Team, Looks at the Impact on the West Midlands
Byline: Simon Lloyd
The most significant transformation in European logistics markets in previous years has been geographical. For more than a decade, manufacturing operations have been migrating to cheaper locations in China, India and Central and Eastern Europe (CEE).
This eastwards shift is being driven by a number of factors including EU enlargement, more liberalised trade - formalised via government-ratified free trade agreements - and new developments in containerised shipping and supply chain management, which has facilitated the more efficient transportation of goods around the world.
The logistics demand in those low cost production countries comes from two sources: one is from people establishing networks in those new regions, and the other is to satisfy local domestic demand.
With GDP rising much more rapidly in the CEE countries compared with Western Europe, a significant amount of new logistics activity is going into those countries to satisfy domestic demand.
As manufacturing moves to low cost economies and the consumption of goods in Western countries including the UK remains relatively steady, the requirement for products to be moved around increases. As a result, demand remains good for logistics buildings around the UK, particularly in the Midlands, which is the prime market for national distribution purposes.
Whilst the surge in sea traffic has benefitted European logistics markets, particularly in the regions surrounding the deep sea ports, the high volume of goods shipped has resulted in high levels of congestion.
A number of projects are being implemented in an attempt to address this issue, most notably the EU Motorways of the Sea initiative.
Motorways of the Sea aims to reduce congestion by encouraging nearby less well-developed ports to take a share of the market, thereby taking some of the weight off Europe's super ports.
Infrastructure development tends to go hand in hand with market growth - better accessibility and transport connections fuels demand - and there are real opportunities for logistics operators locating warehouse and logistics centres near to emerging ports.
Logistics operators should also look to locate on major new road transport corridors, as well as in and around ports. The "new Silk Road" (or "Eurasian Land-Bridge System") presents one such opportunity.
The project aims to revive and expand the old Silk Road, inter-linking the population centres and major development regions of Europe and Asia by a network of transcontinental infrastructure corridors.
The new route will promote increased trade between the two continents. This will feed through to growing demand for logistics operators active in those markets that sit on the main trade routes. In particular, the Balkans' logistics market (which includes markets such as Bulgaria, Greece and Turkey) is set to benefit tremendously from this increase in activity and the region is expected to emerge as a major transportation hub between Europe and Asia. …