Five things you should know about urban logistics

Increasingly in demand, urban logistics remains one of the fastest growing areas of the supply chain, with new e-commerce and q-commerce businesses fuelling momentum.

As more investors and occupiers approach this growing sub-sector, we take a look at five key facts.

1. “Urban logistics” is being used more and more for all real estate related to the movement of goods within or near urban areas

But its rising appeal means often ambiguous and unclear use of the term. At JLL, we define urban logistics as a facility well-positioned to deliver to both B2B and B2C end users - within an urban conurbation.

Within this sub-sector, assets can be segmented further based on building layout, site density, activity type, and by the properties’ role within the total supply journey.

It’s important to distinguish between urban logistics as an ‘umbrella term’, and its first level of component parts: B2C and B2B; as well as the type of facility - from last mile and micro-fulfilment to Q-commerce fast delivery units for groceries, meals and parcels.

2. Diverse and robust range of occupier demand

From a macroeconomic perspective, 75% of Europe’s population, according to the World Bank, lives in urban areas – locations tipped for sustained population growth and marginally higher GDP growth than national averages.

Increasing online sales, shortening fulfilment times, and the rise of Q-commerce have triggered additional demand for space from both couriers and e-retailers. As well as new demand created by structural shifts intensified by the pandemic, urban areas already offer solid demand.

And industrial space in urban areas continues to benefit from the presence of the food and beverage industry, leisure and hospitality, and the higher concentration of SMEs associated with major cities.

3. Building configurations are not yet standardised, with end users taking up a range of spaces

Urban logistics reduces total operational costs, of which van drivers’ wages represent the largest share. That puts the focus on strategically located facilities that can offer efficient drive times and proximity to customers – be they businesses or households.

Within the facility, parcels (B2C) or pallets (B2B) are moved from larger to smaller vehicles, which can then access densely populated and congested urban areas.

As a result, urban logistics space typically needs to enable cross docking, has little or no storage and has a low site ratio with large yard space to allow for vans to park while waiting to be loaded.

Building configurations are often unstandardised with end users taking up a wide variety of spaces, from underground or multi/storey parking space to former light industrial, repurposed assets and purpose-built locations.

4. Low land availability, unfavourable local policy, and competition from other uses

Over the past 50 years, major European cities saw industrial and logistics space displaced from central locations. At the same time, urban land loss has risen, and housing shortages have intensified. That means limited availability of suitable sites – which are liable to fierce competition from alternative uses, and often subject to restrictive local policies that often favour the likes of residential.

With growing consumer demand and the need for handling capacities, occupiers are now employing an innovative array of real estate solutions to ensure increasingly pressured supply chains can keep pace.

5. Small proportion of both occupier take-up and real estate investment

Despite increased interest in urban logistics, a lack of suitable supply for both occupiers and investors remains a hurdle.

Buoyant investment fundamentals, alongside a robust occupier market, continue to attract interest from a range of players, regardless of the many high barriers to entry.

Entrance to the market is often through strategies such as indirect investment for investors and, for occupiers, asset repositioning.

To find out more about JLL’s urban logistics advisory, head here.