European warehouse demand surges as e-commerce giants like Amazon and Alibaba snap up space

Big investors are pouring money into warehouses in Europe as online shopping for goods — some all the way from China — takes off in the wake of the coronavirus pandemic. E-commerce was already growing before the emergence of Covid-19 forced people to stay home and storefronts to close. Now, the pandemic has likely sped up the pace of e-commerce adoption by about 12 months, real estate consultancy Savills said in a December report citing the Centre for Retail Research.

One of the biggest challenges for businesses wanting to take advantage of the trend is finding ways to fulfill orders more quickly. Companies that once relied on supply chains spread around the world face a shortage of shipping containers, resulting in high delivery costs and long wait times. The new strategy is finding warehouses near customers and stocking them ahead of time, so shoppers can get their orders in just a few days or less.

That’s caused a surge in warehouse demand, driving vacancy rates in Europe to a record low of around 5% — and the rate is still falling, said Marcus de Minckwitz, director of the omnichannel group in London for Savills. Total investment in European logistics last year rose to 38.64 billion euros ($46.5 billion), the highest on record since 2013, according to Savills. Now, Europe awaits more demand from Chinese e-commerce players entering the market, led by Alibaba, de Minckwitz said.

Alibaba has been expanding its cross-border e-commerce business, primarily through its AliExpress platform and Cainiao logistics arm. The company cited rapid growth in cross-border e-commerce as contributing to a 51% year-on-year surge in Cainiao’s revenue to $1.74 billion in the last three months of 2020. Revenue from international commerce wholesale rose 53% to $577 million during that time, according to Alibaba.

European warehouse demand surges as e-commerce giants like Amazon and Alibaba snap up space, CNBC, Feb 9