Investment Perspectives

Labor Proximity is a Major Driver of Logistics Occupiers’ Location Strategy

Laurie Lagarde, EMEA Head of Logistics Operator Division, CBRE Investment Management

January 23, 2024 6 Minute Read Time

Truck parked in front of an industrial building

Logistics occupiers have a growing number of considerations to weigh when assessing the optimal location for new assets. These range from financial to logistical, and encompass diverse concerns related to supply chain resiliency, geopolitical insulation, as well as sustainability priorities. The prominence of each consideration is dynamic and tends to be indicative of the balance of local and global economic influences. In the current market, proximity to skilled labor has evolved into one of the most important considerations for European logistics occupiers seeking to expand their operations. 

There are several intertwined drivers, and implications for the growing importance of access to labor, responsible for this trend, which are worth summarizing. 

  • Industry grows as the skilled labor pool shrinks. In the past three decades, the logistics industry workforce in Europe has more than doubled—
    from 6 million in 1990 to around 15 million in 2023, according to Oxford Economics data. Logistics employers need more workers from a thinning labor pool due to increased competition for human capital. In the past two years, competition for labor between occupier peers has become a highly competitive battleground, raising the relative importance of corporate location as a key pillar in a company’s talent recruitment and retention strategy.

Figure 1: European Transport and Storage Sector Employment (000s)

Chart showing European Transport & Storage sector employment

Source: Oxford Economics, CBRE Investment Management: Q4 2023
  • Europe’s labor market dynamics reveal recurring challenges across the Continent—from the Netherlands, to Germany, Poland and the Czech Republic. An aging workforce, a lack of young people entering the logistics industry and a skills mismatch within the available labor pool. The skilled labor supply crunch was present prior to the pandemic, then accelerated during the period, and continued long after lockdowns ended and supply chains normalized.
  • The problem of labor shortages is obscured by potential technology innovation. The fever pitch excitement around technological advancements—including automation, robotics, artificial intelligence (AI), autonomous vehicles and drones, sensors and automatic identification—has arguably masked the reality of the labor problem, as many often assume these innovations will replace the need for human labor. This perceived reality is misplaced. Logistics occupiers are substantial investors in innovation to improve efficiency and productivity, but these technologies require human judgment and expertise to operate and maintain automated systems. Ultimately, technology increases the need for more skilled human labor across the logistics industry, while more mundane and repetitive tasks have become automated.

The labor shortage in the logistics sector is not a temporary problem. Logistics firms are adopting employment strategies from the office playbook, focusing on social considerations to help attract and retain employees. This involves creating amenity-rich workplaces with vibrant on-site environments, access to wellness services, on-site training to support career advancement and development, competitive wages, and flexible work schedules. According to a December 2021 survey of DHL operations workers, six out of 10 respondents wanted to work remotely at least once a week, which prompted the global logistics operator to utilize teleoperation technologies to make flexible work more accessible. Developing the right features in buildings in order to attract labor is part art, part science. Beyond the general amenities, location conveniences are also important, such as access to transportation links, facilities to accommodate lunch and places to relax during work breaks all help incentivize talent recruitment and retention. For example, in March 2019, Rhenus Logistics opened an 800 sqm business site in Plauen, Germany to meet increased customer management demand while reducing commuter travel time for employees.

The efficacy of these strategies can be improved through effective communication of clearly defined company values, including articulating the importance of employee happiness as part of its corporate objectives. CBRE Investment Management has developed a client relationship management (CRM) strategy which aims to work with occupiers as a partner to define and implement operational requirements across their real estate footprint, including existing facilities and new developments.

Inadequate skilled human labor is a major disruptive force within the European logistics sector which requires a coordinated response to ensure operators have appropriate access to workers to meet their future demand growth. Those occupiers that get ahead of the labor problem curve need to act thoughtfully and decisively across their operations and ensure authentic and consistent messages are clearly communicated to existing and prospective employees—whether they work in operations, in an office, as a courier, a manager, or a mechanic. Building closer relationships with occupiers helps investor-developer landlords develop buildings better suited to logistics occupier requirements. The ambition should be to integrate best practices in the market, including repurposing workspaces to offer a pleasant, flexible and dynamic environment, in which people and sustainability are at the center and technology is optimized as the strategic enabler.