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Mastering the ‘last-hour’ market

Careful location planning means logistics operators can maintain proximity to potential customers without overpaying on rent.

The final hour

Fast delivery is about time, not just distance – last hour rather than last mile. With customers becoming more demanding, rents increasing and supply limited, it is more important than ever to choose the right location for a logistics facility.

Fuel is typically a far greater cost than rent for logistics operators. A key consideration for location, therefore, is minimizing drive time. Analysis by DWS Group and location and customer analytics specialist CACI, compares the highest online spend potential within a 60-minute drive time with rent and land values. It suggests there are locations where occupiers can find relative value and investors could benefit from potential rental outperformance – specifically in the UK and Germany, although the same principles apply in other markets.

Spotlight on Germany

Smarter cities: potential hubs with high levels of online spend potential offering significant rental discounts to established locations. Source: DWS, August 2019. Click on map to see full screen

There are many potential logistics hubs in Germany that would balance access to high customer spend potential while offering discounted rents when compared with established hubs. Supply constrained last-hour locations such as Pforzheim, where rents are low, provide a ‘base effect’ defensive cover, believes DWS. These locations will particularly benefit once technological change makes time over distance a more important factor.

Online spend potential matters, but a small reduction in that department can be married to a significant drop in rent levels. For example, in the North Rhine-Westphalia region, where average access to online spend throughout the state is almost triple the national average, the likes of Herne and Bochum have similar levels of online spend potential as Dusseldorf and Cologne but offer relative pricing and rental discounts.

Locations near Frankfurt can also be interesting. There are low rents and favorable base effects. While rents are high in the Bayern region, the likes of Augsburg and Ingolstadt are relatively cheaper than Munich.

Prime locations in south-eastern Berlin are pricey, but rents are 18 percent cheaper in Potsdam.