Benelux at the crossroads of Europe
We are living in an extraordinary century of urbanization and globalization. In an age where expansive networks of cities are becoming more important than nations, we often have more in common with cities thousands of kilometres away than we do with our hinterlands a few hundred or even a few dozen kilometres away.
As leaders, investors, and citizens, we ask ourselves: what kinds of new opportunities and challenges are we facing? Are the fortunes of existing cities and regions guaranteed?
Major shifts are transforming the prospects of our region. For starters, on a global basis, we are tilting eastward; at present all of Asia (including China and India) accounts for 30% of global middle-class consumption, but by 2050, Asian activity will represent 70% of the global economy.
We are also living longer; for the first time in history, we have regularly four generations in the workforce, and this demographic widening also broadens our values and the nature of our multi-ethnic communities. Of course there are also technological shifts; the digitalization of the workplace and the rise of machine intelligence are destroying established customs and creating entirely new ideas about work, habitation, education, and leisure. The successful future city will embrace these astonishing and ongoing changes.
The Benelux (Belgium, Netherlands and Luxembourg) countries are particularly exposed to these shifts through their multi-facing windows on the world – the ports of Rotterdam, Antwerp, Ghent and Zeebruges, or Schiphol and both Brussels airports. The region interacts with the East by exporting large amounts of high-end goods from the Belgian, Dutch, German and French industrial heartlands, as well as importing commodity goods from the East to the consumption centres in the Benelux / Rhineland megapolis. These windows, production and consumption centres are well (inter)connected with crowded highways, railways and waterways. Benelux is truly at the crossroads of Europe.
As a consequence of being one of Europe’s key domestic hubs, as well as a gateway to the wider world, the logistics and distribution sector is an exceptionally important part of the regional economy. Belgium and the Netherlands have long since been recognized for their multi-modal accessibility, with activity in Belgium particularly focused around the Brussels, Antwerp and Ghent triangle, and Charleroi airport.
With retail clients and increasingly e-commerce continuing to drive occupier demand, there is impressive absorption across a range of asset types, hence pushing down vacancy levels in the most popular locations. Coupled with limited new supply, but with a plethora of investors seeking exposure to the robust fundamentals of both the region and the logistics sector, investment yields are undergoing compression.
Speculative warehouse development is slowly on the increase, however build-to-suit projects continue to form a significant proportion of new construction. Together with the increasingly complex requirements of the e-commerce sector, new insights and approaches on how to design, construct and future-proof warehouse properties are coming to the fore; advanced racking and picking systems, non-standard ceiling configurations, smaller out-bound loading bays for vans rather than trucks, and real-time IT-systems for supply and picking are all very much the norm.
Staff facilities continue to evolve, with designing to minimum statutory requirements no longer enough for highly efficient picking facilities and shift work. Functional, efficient operations-led, process-oriented, design is key, and rather than minimising investment costs – operational effectiveness is becoming a key factor in maintaining investment value longevity.
With investment values in the logistics sector continuing to improve, and strong occupier fundamentals fueling both the supply of new product and rents, the thriving Benelux crossroads continues to become an attractive destination for both development and investment.