The rise of reshoring and nearshoring — the movement of production closer to end-consumers — is driving logistics investment in Europe to record highs, as geopolitics and supply chain disruptions prompt more manufacturers to move production to the continent. 

“Nearshoring will be a constant theme [in logistics] for the next five years or so,” John Harcourt, managing director of Japanese-owned Kajima Properties Europe, said at the Mipim event in Cannes, France, this week. “We’ve had Covid, [geo]political upset, the Ever Given containership blocking the Suez Canal and Houthi rebels attacking ships. All these things start to upset supply chains, and no business in Europe is prepared to take the risk anymore, particularly at a time where there's more stress on economic growth.”

Data from fDi Markets shows that foreign direct investment into logistics across the region has hit historic highs, exceeding $30bn each year since 2021. The surge is often attributed to the e-commerce boom sparked by lockdowns during the pandemic, but property developers and investors have told fDi that nearshoring is now powering the asset class’s expansion.

Gustavo Lupi, managing director of Panattoni’s Spain and Portugal business, agrees that nearshoring is now “one of the main drivers today” for logistics investment. “After 2022, there was a decline in demand coming from e-commerce. But then demand picked up from relocation or nearshoring of industrial activity.”

More manufacturing on the continent requires more warehousing and logistics to receive, store and distribute inputs and final products. For businesses still relying on imports from Asia and other outsourcing destinations, some are looking to keep larger stockpiles close to their facilities after being burnt during the pandemic when Chinese suppliers were locked down. These companies have realised that “maybe the supply chain was too efficient,” Mr Harcourt notes, “and [they] need a good stock of things sitting in the warehouse.”

Cost factors make Poland, Hungary and elsewhere in central and eastern Europe among the most popular locations for nearshoring. But Mr Harcourt notes that the Netherlands and Germany are also benefiting from logistics investment spurred by business relocations, given their access to the Port of Rotterdam which is Europe’s biggest.

Mr Lupi notes that the trend stretches into Iberia, too. Panattoni is developing a €36m distribution centre for tyremaker Bridgestone, adjacent to its manufacturing site in Burgos, Spain, to support increased production due to its decision to stop manufacturing in Russia following its invasion of Ukraine.

Bigger is better

Manufacturers increasing their European footprint due to nearshoring are also consolidating their footprint to avoid having smaller facilities in multiple locations. “[Businesses are] finding ways to make their logistics networks more efficient,” said Daniel Bumpstead, head of European investments at Kajima Europe. “In some of our buildings, tenants that had around four logistics warehouses have consolidated into one … That links back to cutting emissions of lorries driving between units, but also cutting costs because one of their biggest costs is that transport.”

Data from fDi Markets shows that the average investment in logistics over the past two years has hit a decade high of $59m. Mr Lupi has also witnessed logistics facilities growing in size, in part to minimise supply chain disruptions. 

Major logistics developers in the UK note that they have seen more companies demanding more space in the UK to boost the resilience of their operations

“Resilience and security is driving people to have either more stock holding in the UK or even place assembly and straight manufacturing [in the market],” Robin Woodbridge, the head of capital deployment and leasing at Prologis in the UK, adds.

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