It seems that the manufacturing industry is increasingly going to disappear from cities. This is because there is a shortage of business space. This conclusion is drawn by Cushman & Wakefield after an industry survey.
Occupancy of business space hit a record high of 4.5 million sq m in 2017. Previous records stood at an uptake of 3.6 million sq m of commercial space in a year. Vacancy fell 17 per cent to 2.8 per cent of the stock, a level well below the norm of a healthy commercial space market, according to the international real estate consultant. Cushman & Wakefield therefore calls for the retention of manufacturing in cities because it is important for vibrant cities.
The figures on the industrial space market were recently launched in Cushman & Wakefield's latest edition Nederland Compleet. The business space segment (the other being the office market) is divided into industrial and logistics property in the study. The record take-up of industrial real estate of 2 million m2 in 2017 is an increase of 13 per cent compared to 2016. The take-up of logistics real estate rose by a whopping 39 per cent to 2.5 million sq m last year.
Frank van der Sluys, Head of Research Cushman & Wakefield: "Our real estate data confirms the economic boom in the Netherlands. Both the manufacturing industry and the transport and logistics sector are growing strongly, as are manufacturing jobs. Because of the need for housing in cities, the manufacturing industry is increasingly being pushed out of the city, making the market for industrial real estate there too tight at the moment. While the housing need is justified, we must guard against a monoculture. So our cities must grow, because besides all the functions that belong in a city, the manufacturing industry also adds value to a city."
Tight market
The vacancy rate of business space has fallen sharply by 17 per cent (1.6 million sq m) to 7.8 million sq m in one year. Of this, 6.6 million sqm concerned industrial properties and 1.2 million sqm logistics properties. Relative to annual occupancy, the supply of industrial real estate is more than three times higher. In the logistics property segment, with twice as much demand as supply, the market is very tight. It should be noted that demand is still strongly focused on new distribution centres that are customised.
Menno van Boxtel, Head of Logistics Cushman & Wakefield: "Apart from various technical and sustainability requirements, the existing supply often simply does not suffice in terms of size. The demand for larger-scale distribution centres and higher specification requirements will only continue, especially for e-commerce. We have seen this trend for several years and it will continue this year."
The Netherlands still manages to attract many logistics service providers who serve a large European sales area from European Distribution Centres. Partly because these sales areas are getting larger, the need for large-scale distribution spaces is increasing. These large transactions are driving take-up. New construction plans that are not yet under construction are not included in the supply. This is also reflected in the top 10 largest industrial space transactions in 2017. The entire top 10 consists of logistics properties, and nine of them involve new construction. The largest transaction took place in Lelystad where Inditex will use 170,000 sqm.
Geographical spread
Due to the emphasis on large-scale transactions, the geographical spread of logistics real estate is limited. In total, take-up in 2017 was spread across 57 locations in the Netherlands, making the top 10 accounting for 57 per cent of take-up. The top 10 places with the highest take-up in logistics real estate is a mix of hotspots where multimodality is decisive and hotspots where multimodality and proximity to consumers is crucial.
Top 10 Places Highest Take-up 2017 In M²
Industrial Logistics
Place Metrage Place Metrage
Amsterdam 63,000 Venlo 441,00
's-Hertogenbosch 52,000 Lelystad 170,000
Rotterdam 50,000 Tilburg 151,000
Breda 50,000 Utrecht 126,000
Oud Gastel 40,000 Bleiswijk 121,000
Zwolle 39,000 Nieuwegein 106,000
Oosterhout 35,000 Moerdijk 102,000
Zaandam 35,000 Eindhoven 96,000
Eindhoven 32,000 Roosendaal 71,000
Son 32.000 Born 57,000
Industrial property occupancy has a much wider geographical spread. The top 10 account for 'only' 22 per cent of the national take-up, but also comprise sizable transactions between 12,500 and 35,000 sqm. Total take-up is spread across 318 locations. Amsterdam saw the most industrial property take-up in 2017, followed by 's-Hertogenbosch and Rotterdam. The top 10 shows that proximity to consumers is crucial.
Jan Verhaegh, Head of Industrial Cushman & Wakefield: "The growth of industrial real estate is taking place evenly across the Netherlands. However, we do distinguish nine industrially economically strong areas. Besides the Randstad, we see outliers in the regions of Twente, Zwolle, Arnhem-Nijmegen and Brabant. In many places in these regions, absorption is inhibited by scarcity of high-quality supply."
More than the Randstad
The report does not really answer the question how important it is for the manufacturing industry to concentrate in the big cities, although it is clear that the manufacturing industry is spreading beyond just the Randstad, in which the four largest cities in the Netherlands are located. Macroeconomist Matthijs Bouman wrote recently in his column in the FD that the Netherlands is more than 'four cities and some grassland'. He points out that relevant economic activities also take place outside the Randstad, as the figures on the growth of industrial property above also partly endorse. "Top shelf innovation in Eindhoven, modern manufacturing in the Achterhoek, agricultural high-tech in just about every corner of the country," Bouman writes.
In 2016, Ruimtevolk's talk show 'Next Steps 2.0' also further discussed the city as a workplace. Imke Carsouw, then director of Brainport Eindhoven, said then: "We see ourselves as a high-tech manufacturing industry. "The Brainport region is innovative and economically thriving International delegations visit the region almost daily, but still I see a lack of appreciation for this type of manufacturing, there is a very strong 'Randstad thinking' in the Netherlands." "The manufacturing industry has to go back into the city, to counteract social dichotomy," argued Belgian Joachim Declerck, owner of Architecture Workroom. "Bringing manufacturing back into the city requires a fundamental revolution of the dominant logic of urban development. An office garden uses space a lot more efficiently than a field for urban agriculture. Moreover, much more is paid for functions in the service economy, think office buildings. If you give the service economy free rein, it creates a snowball effect where all industry eventually disappears from the city." A call to arms is in order, says Declerck: "We have to go against the process of urban development towards a service economy.
Iniatives
Iniatives are also being taken to give the manufacturing industry a place in the middle of the city. For instance, Duncan Stutterheim, the old boss of ID&T, is reportedly building a 40-metre-high tower in Amsterdam to provide space for companies in the manufacturing industry. "It should be a place where people really work and build," he said in August. It is not clear how the plans now stand.
For its part, RDM Rotterdam is a hotbed of innovation for manufacturing companies and students. "Back in the 1950s, this place was already brimming with innovation and craftsmanship," programme director Jouke Goslinga of RDM, which is affiliated to the Rotterdam port authority, told Sprout earlier. "We are using that same drive for innovation now, on the foundations of that illustrious past, to shape the new manufacturing industry."
By: Kelly Bakker
Source: Cushman & Wakefield, FD, Sprout.nl
