Logistics real estate investment in Europe

With logistics real estate an attractive asset class, we examine the opportunities and risks involved.

With logistics real estate an attractive asset class, we examine the opportunities...

Gaultier Saussine, Partner |

In recent years, the logistics sector has emerged as a cornerstone of the European real estate market, driven by the rapid growth of e-commerce, globalization, and changing consumer behaviors. As businesses increasingly prioritize efficiency and speed in their supply chains, logistics assets have become highly sought after. As a center of excellence for investment funds, Luxembourg has a clear role to play in promoting and supporting funds investing in real estate and, more particularly, in logistics assets. Luxembourg’s leadership position has recently been confirmed in the ALFI REIF survey 2024.

Current and recent trends

1. E-commerce boom

COVID-19 accelerated the shift towards online shopping, leading to a surge in demand for logistics facilities. There has been no turning back, with retailers continuing to invest heavily in their distribution networks to meet consumer expectations for fast and reliable delivery. This trend is expected to continue, with e-commerce projected to account for an increasing share of total retail sales in the coming years.

2. Urbanization and last-mile delivery

With urban areas expanding, the need for last-mile delivery solutions has become critical. Logistics companies are seeking to establish distribution centers closer to urban centers to reduce delivery times and costs. This trend has led to a rise in demand for smaller, strategically located logistics assets within cities or in the close proximity of suburban areas. Additionally, urbanization changes have recently driven the demand for self-storage facilities, in response of smaller average size and decreased affordability of housing.

3. Sustainability and green logistics

Sustainability is becoming a key consideration for investors and operators in the logistics sector. Companies are increasingly focused on reducing their carbon footprint and implementing green practices in their operations. This shift is driving demand for energy-efficient buildings and facilities that meet stringent environmental standards.

Opportunities

1. Strong demand and rental growth

The growing demand for logistics space is leading to increased rental rates and low vacancy levels in prime locations. Investors can capitalize on this trend by acquiring well-located logistics assets, which are likely to appreciate in value over time, even if yields in the logistic sector have compressed significantly over the last few years. Built-for-purpose logistics facilities are also an interesting option for investors looking for higher rental levels and long-term commitments from tenants. To facilitate investment, there is no shortage of global capital available.

2. Diversification of investment portfolios

Logistics assets provide an attractive diversification opportunity for real estate investors. With their resilience in economic downturns and ability to generate stable cash flows, logistics properties can serve as a hedge against volatility in other sectors. Our recent article on the 10 key factors for real estate in 2025 might also be of interest for a more general overview.

3. Government support and infrastructure development

The recent announcement from the European Commission – namely ReArm Europe – may lead to further opportunities in the logistics field, including for instance an increased need for secured logistics warehouses. Additionally, European governments are investing heavily in infrastructure development to support logistics operations. Enhanced transportation networks such as rail and road improvements are making logistics locations more accessible and attractive to investors.

4. Emerging markets

While Western Europe has seen significant investment in logistics assets, emerging markets in Eastern Europe present untapped opportunities. In countries such as Poland, logistics was the best performing sector in 2024, with similar trends expected in 2025. As these economies grow and develop their logistics capabilities, investors could benefit from early entry.

Potential threats and challenges

1. Market saturation

As demand for logistics space continues to rise, there is a risk of market saturation in certain regions. Investors must carefully assess local market conditions and avoid overexposing themselves to saturated markets. Logistics assets have become a mature product with less space for significant value uplifts, meaning that deals need to be considered on a case-by-case basis.

2. Regulatory challenges

The logistics sector is subject to a range of regulations, including zoning laws and environmental standards. Navigating these can be complex and may pose challenges for investors looking to develop or operate logistics facilities.

3. Economic uncertainty

The broader economic environment is unpredictable and could impact logistics investments. Factors such as inflation, interest rate fluctuations and geopolitical tensions – which are already a feature of the landscape – could worsen or intensify, creating greater uncertainty and driving down both rental rates and demand. Recent turmoil around the rise of aggressive tariffs worldwide may create market disruptions and change the dynamics of logistics investments, in particular with trends such as nearshoring being preferred to more globalized approaches.

4. Technological disruption

While technology presents opportunities, it also poses risks. Rapid advancements in automation and digitalization could render certain logistics facilities obsolete if they fail to adapt to changing technological demands. Certain energy-intensive logistics assets such as data centers must adapt to sustainability requirements, potentially requiring significant CAPEX planning and impacting their short- to mid-term profitability.

KPMG knows Real Estate

Logistics real estate investments in Europe are poised for significant growth, driven by trends such as the e-commerce boom, urbanization, sustainability, and technological advancements. While there are ample opportunities for investors, it is crucial to remain vigilant about potential weaknesses and challenges in the market.

Our passionate team of KPMG Real Estate specialists is always one step ahead. We have developed a multi-disciplinary approach - from sell/buy-side assistance, valuation, tax structuring and/or compliance assistance to audit, accounting or consulting services - where we combine our expertise with our global real estate network. This allows us to be fully equipped and support market players in adapting to current global challenges, whatever they may be.

Reach out to us and let’s tackle today’s changes and challenges together! By adopting a strategic approach and keeping abreast of emerging trends, we can help you successfully navigate the dynamic logistics real estate landscape and capitalize on its potential for sustainable, long-term returns.