The Long View on European Logistics and What It Means for Ireland

This week I attended Power of Three in Barcelona, CBRE’s annual gathering that draws the largest investors, occupiers and developers in the European industrial and logistics market. In a market full of noise right now, the prevailing mood was pragmatic - focused on the bigger picture, on structural fundamentals, and on where the sector is genuinely headed rather than the short-term backdrop.

The Infrastructure Hiding in Plain Sight

One enduring theme that struck me is the status of logistics property itself. It is no longer simply an industrial asset class; it has become something closer to critical national infrastructure. In a world where e-commerce underpins the delivery of essential goods, the warehouse is as foundational to modern life as the road network or the electricity grid, and the demand for it reflects the health of consumption, trade and economic activity in ways that few other property types can match.

For a nation such as ours, where public infrastructure delivery has faced challenges and is now very much at the forefront of national debate, Ireland has quietly benefited from private sector developers and investors who have taken risks and actively focused on delivery of the modern industrial stock that the country requires, particularly over the last seven or eight years. In fact, there is arguably a case for public investment in providing more of these facilities in regional locations like Limerick, Galway and to a lesser extent Cork, where modern industrial stock is very much undersupplied.

The Fundamentals: Cutting Through the Noise

There is a tendency in real estate commentary — and I am as guilty of this as anyone — to get lost in the granularity of data. Vacancy rates by submarket, rents by class of stock, take-up versus five-year averages. All of it matters, but sometimes it obscures a more fundamental truth. The industrial and logistics market across Europe, viewed simply, is a supply and demand story. And the supply side of that equation remains structurally deficient. There is not enough modern, well-located logistics stock across Europe to meet projected demand over the next five years and in certain locations on the continent, e-commerce is still assimilating into modern life.

New structural demand drivers are emerging across the sector. Increased spending on security and defence, the growing appetite for automation-enabled facilities, and the surge in data centre development, which directly competes for the same industrial land, represent three emerging forces set to underpin occupier demand for years to come.

Power and Constraints on Growth

One theme that is now also in focus for the sector is energy, specifically the availability of power to service the next generation of logistics facilities. Modern warehouses are increasingly power-intensive. Automation, electric vehicle charging infrastructure and data-driven operations are transforming the energy profile of the sector, and grid capacity is emerging as a genuine constraint on development in many European markets.

France is increasingly cited as being ahead of the curve, its long-standing commitment to nuclear energy now providing a meaningful competitive advantage as European economies wrestle with the transition.

But it was notable that Ireland’s grid constraints are not unique in this context — this is a pan-European challenge. Five years ago, power availability rarely featured in site selection conversations. Today it is a primary concern. That shift has implications: planning policy and energy policy, which have traditionally operated in separate silos, will need to become increasingly interconnected if we are to accommodate the logistics needs of the next decade.

E-Commerce: The Second Chapter

E-commerce penetration, the share of retail sales transacted online, had appeared to stabilise after the extraordinary acceleration of the pandemic years. The consensus in Barcelona, however, was that we are now entering a second chapter of e-commerce: this stabilisation is giving way to a renewed upward trend, and the next leg of growth will be geographically uneven. Southern Spain and parts of Germany are markets where e-commerce has actually not yet fully assimilated into consumer behaviour and where logistics demand driven by online retail has further to run.

Automation Intent

CBRE’s own occupier data highlighted an interesting gap between intention and execution on warehouse automation. More than 70% of occupiers would like any new warehouse they take to offer a certain level of semi-automation. Just over 20% currently operate with it. That gap represents both a challenge and an opportunity — the technology is maturing, the business case is compelling, and the labour market pressures that once sat in the background have become more acute.

There is also a less obvious infrastructure implication: robotic systems require exceptionally flat warehouse floors. New development, built to the right technical standard from the outset, will increasingly command a premium on that basis alone. Expect that 20% to move meaningfully over the next cycle.

A Changing Geopolitical Canvas

What is notable among European economists and investors is that American investors are actually more positive on the outlook than their European counterparts. Europe’s more cautious disposition is in some ways simply how this market thinks, but it also reflects genuine uncertainty about the continent’s fiscal trajectory and geopolitical exposure.

The keynote speaker at the conference focused on defence and geopolitics. The central assertion was striking: the last four years have been the most violent since the end of the Cold War. The wars in Ukraine and the Middle East, together with rising tensions in the Indo-Pacific, have fundamentally altered security in Europe.

European defence spending is expected to increase to around 3.5% of GDP, a shift that looks set to endure regardless of changes in political leadership. This increased spending will likely generate greater demand for warehousing, storage and logistics facilities across the continent, and while Ireland sits largely outside that dynamic, it remains a trend worth monitoring given its influence on the broader European market in the years ahead.