The production and distribution of goods has developed dramatically over the last 10-20 years. Globalization has resulted in moving production units to low cost countries, more and more cost effective containerized shipping, and expanded free-trade.

At the same time the strong economic development in many markets had led to increased consumption and thus a great need for warehouse- and logistic properties at strategic locations.

Key drivers - logistic properties

1. Increased domestic consumption of goods demands larger inventories
2. Production of goods in low cost areas demands larger and more centrally located warehouses and larger hubs closer to logistics corridors
3. Distribution cost from locations far away has become cheaper.

Key trends – the Nordic region

1. Strong investor demand for real estate exposure (direct and indirect)
2. Increasing focus on the Northern European region by global operators
3. Trans-European Transport Network has a Scandinavian priority axis with main focus on Southern Sweden.

Key rental features of logistic property

1. Historic rent level has been relatively stable and increased demand for capacity may lead to rental increase
2. A Swedish survey by CB Richard Ellis show that 50 per cent of larger companies has a lease between 5-8 years, and one third above 8 years
3. Favourable tenancy arrangement in relatively low tenant replacement cost and predictable cost structure.

The importance of strategic locations

As a step towards more efficient supply chains, warehouses and distribution centers are more and more centralized to strategic locations that secure the flow of goods within a region. The optimal distribution center is located close to an extensive consumer base and in an area with good infrastructure. The Nordic countries’ main hubs are the capitals as well as growing regional cities.

The Swedish market for logistic properties is concentrated to the southern part of the country where the infrastructure is well developed and where there is a large customer base. Three main geographic areas have the largest representation of logistic properties and distribution centers. These are Stockholm/Mälardalen, Gothenburg and the Oresund Region.

The expansion of the European market means that larger distribution areas must be covered and many companies establish new regional distribution centers in the expanding markets.

In addition, the increasing demand for short lead times and prompt deliveries increases the need for logistic properties situated close to the end customer. This creates an increasing demand for logistic properties on strategic locations, near the consumer and with well developed infrastructure in the region.

Flexible space more important

Today both the market conditions and the specific demands for logistic properties are changing rapidly. This has resulted in a trend that companies rather rent or lease logistic space than own the properties themselves. For logistic property owners it is increasingly important to be able to offer flexible logistic properties that easily can be adjusted to the customers’ changing need.