Demand for Europe manufacturing unit area rises 29% amid ‘nearshoring’ rush

Producers all over the world are snapping up extra European factories regardless of an financial downturn within the area, as geopolitical and provide chain issues immediate companies to convey their operations nearer to their clients.

Companies acquired or leased 9.6mn sq. ft of commercial area within the area in 2022, a 29 per cent enhance over the earlier yr, in keeping with Cushman & Wakefield. The business property dealer’s evaluation covers transactions in 9 European nations, together with the UK, France and Germany.

Tim Crighton, Cushman’s head of logistics and industrial in Europe, stated he was not too long ago seeing purchasers “nearshoring” by investing in European manufacturing so they’re much less depending on China in addition to different far-flung places.

Producers from Asia to Europe have been buying European factories in response to demand from purchasers within the continent, who in current a long time had outsourced the manufacturing of most of the items they purchase to China and different low-cost manufacturing hubs.

The rising demand for brand spanking new factories comes as total take-up of European industrial area declines amid a fall in client spending which has prompted retailers and warehouse homeowners to chop again on investments.

Column chart of New acquisitions and leases of European industrial and logistics space, by sector (millions of square metres) showing Manufacturers snap up European property even as overall demand for industrial space declines

However corporations are rethinking their technique as tensions deepen between western governments and Beijing, in addition to the extreme disruption to world provide chains in the course of the Covid-19 pandemic.

Crighton stated using robots in manufacturing, which has minimised the price profit of manufacturing in areas with cheaper labour, created a “compelling” case for European companies to spice up manufacturing nearer to shoppers.

Pointing to Mercedes-Benz’s not too long ago introduced plans to construct its first manufacturing unit devoted to electrical vans in Poland, in addition to BMW’s plans to spice up automotive battery manufacturing at a brand new plant in Hungary, Cushman’s report stated central and jap Europe, the place labour was comparatively low cost, had specifically seen “main funding in manufacturing”.

Bert Hesselink, shopper relationship director at European business property proprietor CTP, stated manufacturing websites have been making up an rising share of its portfolio since a drop-off in demand for warehouse area.

“[Our clients] are being informed, ‘if you wish to proceed supplying us, we choose you do it from Europe as an alternative of China’,” he added. Though investments in new websites have been rising producers’ prices throughout a interval of already heightened inflation, he stated corporations have been prioritising securing their operations from the subsequent provide chain “catastrophe”. 

Not all companies have been exiting China, nonetheless. Many have seen their provide chains affected by elevated power prices, which not too long ago helped tip industrial powerhouse Germany right into a recession. In April, Dulux-owner Akzo Nobel stated that the Dutch group was truly having to supply extra from China after power prices pressured its European suppliers to shut factories.

After years of western multinationals investing in China, enterprise leaders have additionally warned that Europe lacked the manufacturing labour pressure to match. 

“It’s a problem [finding people with the right skills],” stated Hesselink. “And that must be handled by, for instance, bringing in staff from overseas nations.”