During 2022, businesses and households across Europe faced an economic storm of skyrocketing inflation, rising interest rates, surging energy prices, and more. For the logistics sector, the year also featured prices for construction materials spiking at 40% above 2020 levels, supply shortages, peaking demand, and construction delays – partly due to war in Ukraine and partly a legacy of the global health crisis.
The European logistics sector is highly sensitive to disruptive forces, as modern supply chains are highly distributed and international, yet closely interlinked. According to industry experts, in Germany, issues with supply chains hit 60% of businesses during the year. In neighbouring Poland, they added an extra 3-4 months to the length of some construction projects.
Away from headlines about tough conditions, plenty of activity and progress took place in important areas. This article focuses upon three of 2022’s big themes which P3 has observed to be significant for the 11 European markets in which it operates: strengthening supply chains, sustainability, and e-mobility. Like a modern supply chain, these topics intersect and link together.
Supply chain
One major development in the logistics sector has been the European Union Supply Chain Act, which comes into force in 2023. This legislation matters because it holds businesses legally responsible for meeting minimum environmental and social standards. The big idea is to promote sustainability and fairness continent-wide, by ensuring businesses involved in supply chains uphold environmental and human rights protections. Complying with the Supply Chain Act will be no small undertaking because it is all-compassing. The law covers everything from the extraction of raw materials from the ground, through to delivery to the customer, and finally disposal.
To guarantee compliance, it's clear the old ways of doing business won’t be enough. Therefore, innovation is a prerequisite for tracking materials and goods within supply chains more closely than ever before. The year saw the commercial real estate sector continue to modernise and shed its old image as an innovation laggard.
A promising solution for complying with the Supply Chain Act is ‘blockchain’ technology, which strengthened its use-case potential during 2022. As a tamper-proof, ultra-secure online ledger which records every part of any transaction – for example the production and delivery of steel for a new warehouse – blockchain looks well-placed to help logistics players and their customers achieve compliance with the EU Supply Chain Act.
Sustainability
Another big concern for developers and customers in 2022 was sustainability. Indeed, the environmental, social and environmental (ESG) agenda now infuses almost every business area. In the Netherlands, 70% of logistic occupiers said sustainability is a factor when choosing a location. In Germany, research found 50% of customers would be happy to pay €2 more to make their online shopping ‘greener’, while 25% of shoppers would pay €5 more. Elsewhere, in France, demand is high for ‘green’ warehouses which make minimum environmental impacts, a study found.
Forward-thinking logistics developers met this growing appetite for ESG during 2022. At P3, every new property the developer builds now targets a BREEAM ‘Excellent’ rating for sustainability. Through 2022, P3 worked towards the goal of certifying the buildings in its portfolio with a BREEAM sustainability rating of ‘Very Good’. At the end of the year, 75% of the developer’s existing buildings are targeted to hold this rating – and the work will continue into 2023.
Similarly, usage of energy efficient LED lighting across the portfolio grew from 56% to 75% over the most recent 12-month period. Changing the lighting in warehouses may seem like a small thing, but countless small optimisations like this add up to a major impact. Likewise, 2022 saw the roll-out of more proptechs for minimising electricity consumption and capturing and reusing rainwater. On the corporate side, the appointment of the first Head of ESG at P3 marked an important milestone in the developer’s sustainability journey, further embedding best practices in the company’s operations.
By the end of 2022, it was crystal clear the only way the logistics sector can ‘move the needle’ on sustainability is via measurable goals coupled with transparency. This is relevant for everything, including complying with the Supply Chain Act, access to loan finance, attracting the best talent – and not least, tackling climate change.
E-mobility
Closely linked to both trends mentioned above is the theme of e-mobility. The drive towards a future of electric vehicles (EV) advanced in 2022, fuelled by a virtuous mix of market forces and environmentally-conscious legislation. As e-commence adoption continues apace across Europe, clean vehicles will play a crucial role in joining customers and suppliers. In Italy, Milan led the way in innovating the future of online shopping delivery, with the concept of mobility as a service for the ‘last mile’ in urban logistics.
But in order to thrive, the logistics sector and its customers must navigate a regulatory environment which penalizes traditional ways of transporting goods. Many courier and parcel delivery services are finding their fleets of vehicles are on the wrong side of new regulations. That’s because carbon-emitting diesel vehicles are among the targets of the Paris Climate Agreement. In Spain, vehicles which emit high amounts of carbon dioxide will be banned from parts of cities with more than 50,000 residents, in 2023. Elsewhere, Paris is proposing a total ban on diesel driving from 2024.
Despite this, much work is needed to be ready for the e-mobility revolution. On the plus side, continuing development during 2022 means electric trucks are set to be 30% cheaper than diesel lorries in 2023. However, the roll-out of EV infrastructure remains sluggish. According to the German Association of the Automotive Industry (VDA), 250 new charging points were created in Germany every week during 2022, but 2,000 were needed.
Meanwhile, charging a 40-tonne truck at a distribution centre is not the same as plugging in an e-delivery bike. It involves the detailed and complex replanning of buildings and infrastructure. In 2022, electric charging infrastructure was built into every asset developed by P3, and this work will continue. Going forward, it is a mandatory criteria in all new construction projects the developer undertakes.
The European logistics sector navigated tough conditions of high inflation, rising interest rates and soaring energy prices, during 2022. Meanwhile, actions taken on sustainability, supply chains, and e-mobility, also disrupted business-as-usual; but with the conscious goal of positive transformation. The year saw innovation and progress in the industry – but there’s still plenty to do.