Growing demand for industrial space in Europe
Europe is witnessing a resurgence in demand for industrial space, given the trend of “reducing reliance on China” and the desire of companies and manufacturers to gain direct access to customers on the continent.
Although this boom has occurred due to the increased confidence of companies and manufacturers in Europe’s industrial capabilities, this trend has been hindered by a number of broad challenges compared to China, most importantly ’employment’ and production costs.
According to the Financial Times, demand for factories in Europe has risen by 29% over the past year as manufacturers and investors scramble to reduce their reliance on China for two main reasons, namely (geopolitical issues and supply). chain crisis).
- Manufacturers around the world are snapping up more European factories despite the region’s sluggish economy.
- Manufacturers and companies are aiming to bring their operations closer to customers in Europe amid concerns over geopolitical tensions and supply chain crises.
In 2022, 9.6 million square feet of industrial space will be acquired or leased in Europe, a 29% increase from 2021, according to data released by US-based global commercial real estate services firm Cushman & Wakefield, whose analysis covers nine countries. Real estate transactions European countries include the UK, France and Germany.
Increased confidence in European capabilities
Muhammad Khafaji, an analyst and journalist from Berlin, said in an exclusive statement to the Sky Arab News website:
- In recent years, EU countries have witnessed increasing demand from factories and industrial sectors in the region.
- This suggests growing confidence in Europe’s industrial capabilities. However, relying entirely on European industry and completely displacing China could be a daunting challenge.
- China is one of the largest industrial countries in the world, featuring low production costs and strong manufacturing capabilities. Furthermore, it is considered a large market for industrial products, encouraging companies to invest in expanding their activities there. Europe also has significant investments in China, which makes the interdependence of the European and Chinese economies even stronger and more complex.
“By investing in European production, customers end up being closer … so they are less reliant on China and other far-flung locations,” Tim Creighton, Cushman Wakefield’s head of logistics and industrial services in Europe, was quoted as saying by the Financial Times report.
Manufacturers from Asia to Europe are acquiring European factories in response to demand from continental customers who in recent decades have outsourced many of their purchases to China and other low-cost manufacturing hubs.
Demand for new factories has risen as slumping consumer spending prompts retailers and warehouse owners to cut back on investment and dwindles industrial land in Europe.
Companies are rethinking their strategies as tensions between Western governments and Beijing deepen and global supply chains are severely disrupted during the Covid-19 pandemic, the newspaper reported.
Creighton said the use of robots in manufacturing (..) made a “compelling” case for European companies to facilitate production closer to consumers.
Improve industrial capabilities
Going back to Khafaji’s statement, he stated that the EU is working to strengthen its industrial capabilities and develop innovations in the industrial sector. Europe has many strong technology sectors such as automotive, aviation, pharmaceuticals and cleantech. The European industrial sector enjoys high quality and strict standards in terms of quality, safety and environmental protection.
Khafaji added: “Europe is considered to be one of the largest economic powers in the world and has strong industrial capabilities in many fields. For example, the automotive industry in Germany and France is one of the largest industrial fields in the world and is famous for its Advanced technology and high quality. There are also many major European companies in fields such as aerospace, medical equipment and clean technology.
He continued: “Germany and China, for example, are witnessing strong trade in the industrial sector. According to official statistics, Sino-German trade has reached (297.9 billion euros in 2022) major trading partners in the field. This has strengthened the economic relationship between the two countries, making one party inseparable from the other.
Mutual investment plays an important role, he explained, as China is one of the most important countries where German companies produce their products. For example, German auto giant Volkswagen has about 27 production bases in China, including 40 factories.
This also shows that European countries attach great importance to innovation and R&D in the industrial field. Huge investments are being made in technology development and innovation in areas such as artificial intelligence, robotics, clean tech and smart manufacturing. This strengthens Europe’s ability to develop high value-added products and meet market demands.
Opportunities and Challenges
Furthermore, the analyst and journalist explains the most prominent opportunities and challenges facing Europe in the industrial sector as follows:
- Europe faces several challenges in trying to fully industrialize itself.
- These challenges include high production costs in some European countries and competitiveness in global markets.
- However, there are also great opportunities, such as increased demand for quality products made in Europe, and improved innovation and technology to enhance competitiveness.
Against this backdrop, the UK newspaper quoted Bert Heslink, Director of Client Relations at CTP, as saying that the manufacturing base is taking an increasing share of the company’s portfolio due to reduced demand for warehouse space.
While investment in new sites has been increasing costs for manufacturers at a time of already high inflation, he said companies are prioritizing securing their operations from the next supply chain “disaster”.
After years of investing in China by Western multinationals, business leaders have also warned that Europe lacks a suitable manufacturing workforce. “It’s a challenge (finding people with the right skills) that needs to be addressed, such as bringing in workers from abroad,” Hesselink said.
The Berlin-based analyst and journalist told Sky News Arab Economy: “In general, Europe can rely on itself to a large extent in the industrial sector, but completely relying on European industry and completely displacing China is a problem. A challenge. It could be a challenge.” The best strategy is to enhance local industry capabilities and strengthen international cooperation to achieve balance and capitalize on growth opportunities in the global market.
Chinese manicure
Dr Najeh Al-Obeidi, an economist from Berlin, said in an exclusive statement to the Sky News Arab Economy website that Europe has already started clipping China’s nails, which is reflected in the electronic chip industry, as the EU has allocated 43 billion to 2030. The euro supports the industry to reduce dependence not only on China, but also on Taiwan and the United States. The cornerstone of the chip factory has already been laid in Germany, and the goal is to increase the EU’s share in this field to 20%.
“There are similar plans for the semiconductors and batteries needed for electric vehicles, culminating in Ford opening Europe’s first electric vehicle factory in Cologne, Germany, worth nearly 2 billion euros,” the economist noted.
In this context, the aforementioned Cushman report mentioned the plans of Mercedes-Benz, in addition to BMW’s plan to increase the production of car batteries in Poland’s new factory, Mercedes-Benz recently announced the construction of its first dedicated production plant in Poland. A factory for electric trucks. Hungary. Especially in central and eastern Europe, where labor is relatively cheap, there has been a “significant increase in investment in manufacturing,” he said.
Al-Obeidi added, “China sensed this and changed its strategy, reducing acquisitions of existing companies and shifting to building new companies in Europe due to European reservations,” while explaining, “ Europe wants to follow a clear approach with China, but not a confrontational one. “With Beijing, it will remain a partner and a commercial competitor, but also an adversary proposing alternative systems … Europe learns from its experience with Russia after the Ukraine war Lesson learned. “