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Growth in new retail distribution networks to drive massive demand for logistics space

New strategies creating need for both mega distribution centres and local depots across Europe, according to Jones Lang LaSalle

London-Moscow, 4 April 2013 – European retailers will need up to 25 million square metres of additional logistics space over the next five years, according to a new report by Jones Lang LaSalle. This equates to five million square metres of logistics space each year - enough to more than cover the whole of New York’s Central Park - for each of the next five years.
Demand is being driven both by the need to service existing stores and increasingly by a retail revolution caused by the growth of internet shopping, which is transforming the way goods are distributed to customers. With online sales predicted to almost double in the first half of this decade, e-tailing is creating new demands for warehouse space, including mega sites of over 100,000 square metres, specialist distribution centres and smaller, local delivery depots.

In its report, A new logistics real estate landscape, Jones Lang LaSalle says that around three million square metres of specialised space is going to be needed for dedicated e-fulfilment centres, dealing solely with online demand. Another 22 million square metres is needed for store replenishment, though retailers are increasingly moving to a fully integrated “omni-channel” customer offer, where customers buy in-store, online or via mobiles and either have their purchases delivered to their home or pick-up from stores or dedicated delivery centres.

With online retail expected to exceed 10% of all sales in Europe by 2016, the way goods are distributed and delivered by retailers is changing with the following trends identified:
• Growing demand for mega e-fulfilment centres coupled with increasing demand for parcel hubs to handle delivery. Increased use of robots in warehouses to pick goods, normally working alongside exiting staff rather than as a replacement;
• Greater use of “dark stores” to service online food orders;
Online retail as a percentage of total retail – 2010 and 2016 prediction
Online retail as a percentage of total retail – 2010and2016 prediction.png 
Says Paul Betts, Head of EMEA Logistics & Industrial at Jones Lang LaSalle, said: “While traditional retailing is still driving demand for retail infrastructure, the growth of online is fundamentally changing the size and shape of distribution centres and where they are located. Many retailers have outgrown their existing supply chain infrastructure and are having to work out the best logistics model to service the growth of multi-channel retailing. Their strategy will depend on the type of products, the volume of internet sales handled and the speed at which these are growing.”
Petr Zaritskiy, National Director, Head of Industrial Agency, Jones Lang LaSalle, Russia & CIS, commented: “Russian online market is just starting; its volume is less than 3% of total retail sales. We expect online market to grow much more rapidly than in European developed countries in the next several years. This growth means demand for millions sq m of new warehouse areas. Key question for us is then this rocket growth will start. Currently online market is small but is growing quite rapidly by 20-30% YoY. Before 2012 online-retailers were not demanding high-quality warehouse areas. Last year their share in demand increased to 10% of total volume of transacted space and to 31% of volume transacted by retail companies.”
Retail and e-commerce logistics take-up
Retail and e-commerce logistics take-up.png 
Source: Jones Lang LaSalle

Jones Lang LaSalle has 180 Logistics & Industrial specialists in 31 countries across Europe, Middle East and Africa.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 242 million square meters. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management.
In Russia and CIS, Jones Lang LaSalle has offices in Moscow, St. Petersburg, Kiev and Aktau. Jones Lang LaSalle Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011 and 2012 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg. For further information, please visit