Unlocking the Hidden Optionality in Europe's Warehouses

Intra-region­al trade, sup­ply con­straints, and sec­tor con­ver­gence have been reshap­ing Europe’s indus­tri­al landscape.

Authored By
Ross Blair, Senior Man­ag­ing Direc­tor, Head of West­ern Europe
Vanes­sa Gela­do, Senior Man­ag­ing Direc­tor, Head of South­ern Europe
Alexan­der Möll, Senior Man­ag­ing Direc­tor, Head of North­ern & Cen­tral Europe

Europe’s Logistics Reset

Europe’s logis­tics sec­tor has been enter­ing a new era—one defined not by short-term cycles but by struc­tur­al trans­for­ma­tion. Glob­al trade pat­terns have been shift­ing from inter-region­al to intra-region­al flows, cre­at­ing fresh demand for trans­port nodes and ware­house net­works across the Con­ti­nent. At the same time, nearshoring and the emer­gence of alter­na­tive sup­ply routes such as the ​“New Silk Road” have fur­ther ampli­fied region­al demand.

Euro­pean economies have also been invest­ing heav­i­ly in domes­tic infra­struc­ture and defense capa­bil­i­ties, adding anoth­er lay­er of demand for indus­tri­al space. Ger­many, in par­tic­u­lar, has emerged as a strate­gic hub for mil­i­tary buildup and the move­ment of defense-relat­ed mate­ri­als, sup­port­ed by the €1 tril­lion in nation­al invest­men­t¹ along­side broad­er EU defense spend­ing pro­grams. These forces con­verge against a back­drop of con­strained sup­ply. Vacan­cy rates in many prime Euro­pean logis­tics hubs have been low by glob­al stan­dards, while new con­struc­tion remains sub­dued. For investors, this imbal­ance cre­ates the run­way for poten­tial rental growth and long-term val­ue creation.

Demand Drivers: Beyond E‑Commerce

While e‑commerce remains a pow­er­ful cat­a­lyst, as we not­ed in our recent Hines Research whitepa­per, the sto­ry has broad­ened since the pan­dem­ic. Reshoring is real and dri­ving occu­piers to rethink sup­ply chains. As glob­al decou­pling and ​“Chi­na Plus One” strate­gies take hold, com­pa­nies are mov­ing from Just-in-Time to Just-in-Case, hold­ing more inven­to­ry clos­er to end mar­kets and engag­ing more than one sup­pli­er to build sup­ply chain resilience. For occu­piers, adding a ware­house is often a minor cost com­pared to the broad­er sup­ply chain, mak­ing logis­tics space a rel­a­tive­ly easy lever to pull to strength­en oper­a­tional agili­ty. In prac­tice, this means a greater appetite for urban infill, mul­ti-let and last-mile facil­i­ties that reduce deliv­ery times and opti­mize return logistics.

Key takeaways

  1. Intra-region­al trade, deglob­al­iza­tion have been cre­at­ing new demand corridors.
  2. Lim­it­ed new con­struc­tion and low vacan­cy sup­port rental growth.
  3. Con­ver­gence with data cen­ters and omni-chan­nel retail could offer strate­gic upside.

Our research shows that oper­a­tors will pay a pre­mi­um for loca­tions that have short dri­ve times and cut over­all costs—particularly fuel and labor—even when real estate rents rep­re­sent only a small frac­tion of total sup­ply chain expense. More specif­i­cal­ly, rent growth out­per­formed in loca­tions that could serve the largest aggre­gate amount of house­hold dis­pos­able income with­in a 30 to 60-minute drivetime.

Madrid, one of Europe’s fastest-grow­ing logis­tics mar­kets, offers a clear illus­tra­tion of these dynam­ics. The Madrid-based Nexus Bara­jas indus­tri­al com­plex ben­e­fits from a prime last-mile loca­tion on the A2 motor­way axis, pro­vid­ing direct access to major trans­port cor­ri­dors that serve both the Madrid met­ro­pol­i­tan area and key intra-Euro­pean trade routes. With scarce devel­opable land and his­tor­i­cal­ly low Grade‑A vacan­cy, the asset is well posi­tioned to cap­ture rental growth and deliv­er the flex­i­bil­i­ty occu­piers require as sup­ply chains become more local­ized and resilient. The asset’s tar­get­ed BREEAM Excel­lent cer­ti­fi­ca­tion² fur­ther under­scores a focus on sus­tain­abil­i­ty, inte­grat­ed green spaces, and well­ness-ori­ent­ed work envi­ron­ments that sup­port future tenants. 

As we assess Euro­pean indus­tri­al assets mov­ing for­ward, it’s no longer just about the sin­gle-use 800,000-square-foot ware­house designed for an e‑commerce ten­ant. The over­all equa­tion becomes far less bina­ry. In a small­er unit space, with capac­i­ty for 8 to 10 ten­ants, for exam­ple, there is greater lat­i­tude for Hines to add val­ue over time. As one exam­ple, Hines has assem­bled a port­fo­lio of 26 mul­ti-let indus­tri­al prop­er­ties in strate­gic nodes across the UK to take advan­tage of the grow­ing demand for ser­vic­ing urban shipping.

Investment Lens: Why Europe Stands Out

The fun­da­men­tals are com­pelling. New con­struc­tion is down near­ly 70% from its peak³, with cur­rent mar­ket dynam­ics favor­ing acqui­si­tions over ground-up devel­op­ment, a pref­er­ence rein­forced by our pro­pri­etary research weigh­ing val­ue and cost dynam­ics. At Hines, we approach acqui­si­tions with a dis­ci­plined framework:

  • Loca­tion: Prox­im­i­ty to pop­u­la­tion and trans­port cor­ri­dors, espe­cial­ly last-mile.
  • Func­tion­al­i­ty: Build­ings that meet cur­rent and future occu­pi­er needs, includ­ing sus­tain­abil­i­ty stan­dards and the abil­i­ty
    to accom­mo­date mul­ti­ple ten­ant layouts.
  • Val­ue: Pric­ing mate­ri­al­ly below replace­ment cost and offers rental rever­sion potential.

Deals that check these box­es are where we see opportunity.

The Significance of Warehouse Land Optionality 

Indus­tri­al real estate is no longer siloed. The sec­tor has been con­verg­ing with data cen­ters, advanced man­u­fac­tur­ing, and omni-chan­nel retail. For investors, this means adopt­ing an option­al­i­ty mind­set. In mar­kets where land is scarce and pow­er avail­abil­i­ty com­mands a pre­mi­um, option­al­i­ty offers dual ben­e­fits: sta­ble income now and long-term upside lat­er. At Hines,
we adopt a strat­e­gy that allows for par­al­lel out­comes: pur­sue logis­tics income today while explor­ing enti­tle­ments and pow­er infra­struc­ture for future rede­vel­op­ment. A well-locat­ed logis­tics asset can gen­er­ate income today while also serv­ing as a cov­ered-land play—a strat­e­gy we’ve suc­cess­ful­ly deployed across tar­get­ed Euro­pean mar­kets. In fact, we’re cur­rent­ly in the midst of review­ing all our Euro­pean indus­tri­al prop­er­ties for poten­tial optionality.

This par­al­lel approach aims to mit­i­gate risk and ampli­fy upside poten­tial. If the logis­tics the­sis holds, the asset per­forms. If demand for pow­ered land accel­er­ates, the option­al­i­ty cre­ates a sec­ond (or even mul­ti­ple) path to returns. One exam­ple of option­al­i­ty in action: Hines acquired a three-prop­er­ty logis­tics port­fo­lio near Frank­furt in 2019, ful­ly leased and strate­gi­cal­ly locat­ed next to auto­bahn A66 for last-mile deliv­ery. Dur­ing own­er­ship, the team iden­ti­fied direct access to dark fiber and worked with local author­i­ties to secure re-zon­ing and pow­er for data cen­ter use. That fore­sight trans­formed the asset’s pro­file, cul­mi­nat­ing in a 2025 sale for $198.5 mil­lion, near­ly five times our orig­i­nal pur­chase price.

The Road Ahead

Pol­i­cy uncer­tain­ty and tar­iff dynam­ics have slowed deci­sion-mak­ing in recent months, but we expect the poten­tial for pent-up demand to mate­ri­al­ize once clar­i­ty returns. Com­bined with struc­tur­al dri­vers, includ­ing trade realign­ment, defense spend­ing, and con­tin­ued e‑commerce growth, Europe’s logis­tics mar­ket is posi­tioned for resilience and expan­sion over the next decade.

For investors, the mes­sage is clear: logis­tics isn’t just about ware­hous­es any­more. It’s about build­ing flex­i­bil­i­ty into port­fo­lios and cap­tur­ing the con­ver­gence of sec­tors that will define the next era of indus­tri­al real estate.


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