Amid tariff turbulence, Europe’s logistics sector finds resilience in realignment

While the initial panic has receded and markets are pricing out potential bad news, tariff uncertainty is not going away and will hit the global economy. Some capital expenditure and hiring plans could be postponed, thus weighing negatively on demand for logistics.

This article was published in our June 2025 magazine

Ingo Steves, Swiss Life Asset Managers’ managing partner

Trade wars are disruptive for supply chains and cost pressures could weigh negatively on margins. This could be conducive to more sale-and-leasebacks as tenants want to release scarce capital for investing in their core business. Recent forecasts also point to the risk of a meaningful economic slowdown, which would hit consumers too, thus generating an additional headwind to tenant demand.

However, the impact will not be evenly distributed geographically. Certain port-focused markets are more at risk of a fall in trade volumes. For instance, in the United States, West Coast ports are more vulnerable given the exposure to imports from China. In a European context, large ports such as Hamburg, Rotterdam and Gothenburg also seem more exposed. In contrast, markets with limited reliance on trade and manufacturing and higher exposure to the large local consumer base such as London, Berlin, Paris and Madrid should be resilient even in the downside economic scenario.

Will these risks fully materialise? We don’t know. Policy uncertainty is very high and Trump 2.0 has a disruptive ethos. While the next policy actions and outcome of negotiations with Europe will be difficult to predict, we still see several trends that should support the resilience of the sector in Europe.

Firstly, the recent European policy shifts have improved the relative attractiveness of investing in the region. Manufacturing-related demand will benefit from the defence-related stimulus and there may also be other indirect benefits for Europe, such as higher tariffs on imports to the US encouraging Asian producers to establish manufacturing bases in Europe. The latest Oxford Economics global risk survey reported a significant increase in near-shoring and on-shoring as a driver of improving supply-chain resilience relative to last year. Regions with near-shoring potential, led by central and eastern Europe, stand to benefit, while recently deindustrialising countries, such Italy and Germany, should also receive a demand shot in the arm.

A laggard in the post-COVID recovery, Germany stands out as a market where the policy environment has become more supportive for economic growth: the €500bn infrastructure package coupled with higher defence spending programme should also bolster industrial demand. German markets with established defence manufacturing hubs should offer opportunities for repurposing existing facilities as well as developing bespoke warehouses for military logistics and production.

Lastly, supply chain disruption could lead to more stockpiling and frontloading imports, as we have also seen during the pandemic-induced disruption. This is already happening in the US – the increase in inventories in the first quarter of the year was exceptionally high and is likely to stay elevated in the short-term as firms expect that future shipments will be subject to higher tariffs. In contrast to the measures implemented during Trump’s first term, the risk of a higher tariff world is larger today, which make a reversal to just-in-time supply chains less likely.

The drivers described above, coupled with the structural rise of e-commerce, should remain supportive. However, they are unlikely to supercharge the demand and rental growth fundamentals to the same degree as the COVID-19 pandemic did during 2021-22. The market has normalised since and European average rental growth has reverted to ~3% pa, which is probably closer to medium-term sustainable levels. Vacancy levels are stabilising in the mid-single digit range in most countries, higher in Poland, Spain and the UK, but decelerating supply activity should support rental growth in the mid/late 2020s.

A more volatile economic environment also highlights the importance of data and understanding the logistics occupier decisions based on metrics such as customer reach, accessibility, connectivity and competition at a specific location. In a rapidly changing market environment, harnessing the data intelligence for understanding strategic planning for last-mile delivery and logistics expansion becomes increasingly important. Investors will need a more selective approach to the sector to weather the headwinds, but this remains a structural growth story.

Radu Mircea is head of investment strategy at PATRIZIA