Logistics real estate: what are the challenges facing the sector?

The French logistics real estate market contracted by 24% in 2023, yet transaction volumes remain robust, with a quarter of activity focused on XXL warehouses.. Cette dynamique s’inscrit dans un contexte mondial où le secteur, bien que ralenti, est en pleine mutation, largement impulsée par la montée en puissance du e-commerce. Les prévisions indiquent qu’à partir de 2025, le marché devrait amorcer une reprise significative. Exploration des évolutions et tendances à venir avec Fabrice Galloo, Land Director at Castignac and Development Director of the E-Valley project—the largest logistics park in Europe currently under development—explores future trends and key challenges in the sector.

Following a 25% decline in new warehouse construction in 2023 across North America and Europe, the logistics property sector faces a period of uncertainty. While signs of recovery are expected by 2025, the situation remains fragile. Technological advancements and automation are injecting fresh momentum, but economic uncertainties continue to deter investments. This paints a complex picture of a sector at a turning point.

The Global Logistics Property Market: Balancing Uncertainty and Opportunity

In Europe, annual logistics real estate transactions have experienced a sharp decline. Despite inflation and geopolitical tensions, the warehouse market is preparing for a rebound. The crisis has compelled businesses to optimise warehousing strategies to better withstand disruptions. “Poland and Spain are showing resilience, while France provides a degree of stability. Other European markets, however, are feeling the impact of the recession,” observes Fabrice Galloo.

In the United States, the construction of new warehouses has dropped by 25%, yet key players are reinforcing their positions through large-scale projects. Amazon’s 334,000 sq. m distribution centre in Mt Juliet and Tesla’s 492,000 sqm facility in Fremont, California, exemplify this resilience. This American approach could offer valuable insights for the European logistics property market, where stabilising costs and re-optimising storage remain priorities.

China’s 2024 government report underscores the pivotal role of the logistics real estate sector in economic growth. Demand, fuelled by cross-border e-commerce and shifting tenant requirements, is driving diversification in the rental market. Innovations in cold-chain logistics, particularly in rural areas, mirror similar trends in Europe and the US, where adaptability and technological advancement are critical to overcoming current challenges.

Regionalisation and the Rise of E-Commerce

Regional alliances in Asia and North America are fostering dynamic inter-regional trade hubs. For instance, Mexico surpassed China in 2023 to become the United States’ primary goods supplier.

Other Asian nations, such as Malaysia and Thailand, have also seen significant growth, attracting companies diversifying their supply chains. This shift in warehouse real estate investment aims to reduce reliance on China, favouring geopolitical stability and better proximity to key markets.
Simultaneously, e-commerce continues to drive demand for warehouses. Despite ongoing challenges, leading e-tailers such as Amazon, JD, and Cdiscount are heavily investing. Distribution models are evolving to align with regionalisation, resulting in smaller warehouses strategically located closer to consumers to enhance supply chain efficiency.

Disparities in the Warehouse Real Estate Market

Asia’s GLP Group has made an impressive foray into the European market with a logistics portfolio of 9.1 million sqm, following its record-breaking 2019 private real estate transaction with Blackstone.

This global momentum contrasts with the situation in France, where a saturated logistics ‘backbone’ and limited availability in key regions like Paris have curtailed activity. Secondary hubs, however, are helping to establish a more balanced regional network, underscoring disparities across global logistics markets.

Innovations and XXL Warehouses Take Centre Stage

In Europe, demand for XXL warehouses exceeding 40,000 sqm remains strong, accounting for 25% of total activity in 2023 with 16 projects completed. Medium-sized warehouses (10,000–20,000 sqm) are also thriving, representing 31% of the market with 75 transactions.

Technological innovation continues to reshape the logistics real estate sector. Companies are increasingly adopting automation, IoT, robotics, drones, and warehouse management systems (WMS). Emerging technologies like AI and blockchain are revolutionising operations. For example, Exotec’s autonomous mobile robots optimise storage by accessing items stored up to 12 metres high, enhancing both productivity and space efficiency.

As the warehouse property sector evolves, key trends are emerging to shape a brighter future for investors and market players alike.

Sustained Investor Interest

Investment firms and pension funds are increasingly turning to logistics real estate, drawn by its steady returns and consistent demand. This growing interest is driving higher financing requirements across the sector.

E-Commerce Growth

Online sales currently represent 11% of total retail sales across Europe. The trend is shifting towards optimised urban freight mobility and the advancement of reverse logistics. By 2023, approximately two-thirds of the demand for warehouse space is projected to come from retailers and logistics service providers.

High-Tech, Sustainable Projects

In Southeast Asia, investment in logistics infrastructure is expected to grow by 30% over the next five years, with a strong focus on key urban centres. Developers are prioritising high-quality, long-term leases that integrate automation and decarbonisation strategies. Shanghai continues to display exceptional resilience in market performance.

Multi-Level Warehouses Gaining Ground in Europe

Already well established in Asia, particularly in cities like Hong Kong, the trend towards high-bay, multi-storey warehouses is gaining momentum in both the United States and Europe. As Fabrice Galloo observes: “Logistics will be the most disrupted sector, with a high level of automation. Multi-level, high-rise, ultra-connected warehouses are becoming the norm, with capacities increased tenfold. In China, where land is scarce, developers lead the way with facilities spanning 100,000 m² on a single floor, thanks to the scale of the domestic market. . ’

Flexible Spaces to Meet Changing Demands

In the United States, logistics operators have streamlined inventory management, reducing stock levels by 13 points within a year—an adaptation driven by lessons learned from past supply chain disruptions. “In Europe, E-Valley’s logistics park caters to this demand for flexibility offering modular storage spaces ranging from 6,000 to 150,000 sqm, tailored to users’ needs,” explains Fabrice Galloo. These developments underscore the growing demand for adaptable solutions, heralding the rise of logistics campuses.

A Clearer Regulatory Framework

Uniform global standards, such as BREEAM certification, now shape the sector’s environmental impact. Adopted in 83 countries, this internationally recognised benchmark has resulted in the certification of 500,000 buildings. This regulatory “green deal” promotes low-carbon solutions while driving increased investment, creating a clearer and more consistent global framework for sustainable logistics.

The availability of urban land is a growing concern in the logistics real estate market. According to AFILOG, annual rents have surged by 8% since 2021, highlighting the urgent need to identify and repurpose available sites, including brownfields, for logistics use. Achieving this requires strengthened collaboration between industry stakeholders and local authorities.

Simultaneously, rising construction costs—driven by soaring material and energy prices—are prompting caution among developers in a volatile economic environment. However, there is hope that conditions will stabilise by 2025, easing the burden on both investors and developers.


Transport infrastructure plays a vital role in developing logistics hubs, necessitating significant public investment to upgrade road and rail networks. Urban planning policies must also adapt by incorporating warehouses into their frameworks, enabling smoother transitions to modern logistics models.

Finally, urban logistics, bolstered by public policies and improved access to land, has led cities like Tokyo, Hong Kong, and Seoul to invest in high-rise warehouses. However, public acceptance remains a barrier, with opposition from elected officials, residents, and environmental groups delaying permits and progress.
Despite these challenges, the logistics real estate sector remains remarkably resilient. The global demand for warehouse space continues to rise, driven by evolving supply chains and the rapid growth of e-commerce. Innovative models like E-Valley and supportive public initiatives signal a promising future. In essence, logistics real estate is adapting to current challenges while laying the groundwork for sustainable development.