It’s hardly news that the pandemic spiked demand for industrial space, both domestically and internationally. Longer term, it appears that while demand will remain elevated, the logistics sector will be undergoing some fundamental changes with clear implications for local and regional industrial markets, according to Cushman & Wakefield’s 2021 Global Logistics Outlook.

“The unprecedented disruption caused by COVID-19 pandemic and changing consumer behaviors has reshaped the future of the logistics industry by exposing global supply chain vulnerabilities and accelerating technological advances,” said Cushman & Wakefield’s Jason Tolliver, investor lead, logistics & industrial services, Americas. “As a result, a variety of global trends have emerged, propelling the sector forward in new ways.”

Rising e-commerce adoption is only one of those trends. “Ongoing population growth and economic expansion will drive the global middle class almost to double over the next decade,” the report says. “This increased level of consumption, together with the accelerated shift to e-commerce, will fundamentally drive the need for stronger, more resilient and more diverse supply chains. Ongoing development of transport infrastructure will be critical to ensure market connectivity.” 

A labor shortage in some markets, especially across Europe, together with a sharper focus on Environmental, Social and Governance (ESG) priorities, will force “accelerated adoption of technology to bring greater efficiencies and transparency,” according to Cushman & Wakefield. Similarly, the use of third-party logistics operators will continue to grow.

Geo-politics will continue to shape the global trade environment. “Many short-term interim solutions have been put in place to safeguard against recent trade flow disruptions, but complete rollout of new supply chain solutions will take years as corporates weigh opportunities for reshoring and demand/supply drivers,” the report states.

With all of these drivers of change, though, expect the industrial sector to remain fundamentally strong, based on its performance over the past year. “The global logistics sector not only showed resilience during the strict first-half lockdowns but went on to benefit from consumer and business reactions to the pandemic during the second half,” Tolliver said. “Broadening e-commerce, both geographically and by product range, will be a key driver of new space demand over the next decade.

“In a post-COVID-19 world, there will be greater focus on using real estate to leverage cost across the whole supply chain, better positioning businesses as they navigate a B2C business model, reshoring, inventory management, labor issues, transportation and ESG,” he continued. “Together, these factors will govern location strategy.”