Portugal could become a re-shoring hub in Europe according to the report ‘Supply Chain Disruptions’ by real estate consultant JLL.
After months of interruptions in the supply chain, European companies in the EMEA region are seeking alternatives to production and supply in Ukraine and Asia.
According to the study, there are companies operating in the retail and manufacturing sectors that have decided to relocate all of part of their production: the new European re-shoring beneficiaries are Central Europe and Romania, while states near the European border such as Turkey and Morocco are also potential re-shoring locations, as is Portugal.
The consultancy says that the pandemic caused “a collapse in distribution networks and a serious shipping and goods backlog at ports and airports, so that companies have begun to opt for ‘re-shoring’ in an attempt to solve the problem to interruptions in the supply chain”.
JLL expects that the lack of land sites and manpower will contribute to an increase in demand in Central Europe, in primary, secondary and tertiary markets and in strategic locations.
Data from Flexport shows that an average shipping containers voyage now takes twice the time that it used to take back in 2019, while research from Buck Consultants International (BCI) backs up the same finding from JLL: that more than 60% of US and EU companies are planning to allocate part of their production back home.
Taking into consideration current transport networks and logistics gateways this means that goods will circulate along two distribution corridors: the traditional European Dorsal (from Central England to North Italy) and the emerging Black Sea Banana’ that links Budapeste to the Black Sea.
Marlene Tavares, Head of Retail and Logistics Investment at JLL Portugal says: “The discussion on near-shoring is not new. Salary increases in low cost production locations and the growing risks of climate change, strikes and accidents such as the blockage in the Suez Canal have fuelled the debate on this issue over the past decade.
Moreover, a more favourable cost/risk relationship and the fact that many production infrastructures have been lost in Europe continues to give Asia the advantage when it comes to locating production and distribution hubs for a vast range of products. This scenario is now changing, however, because of the recent (geopolitical) situation and new consumer habits.
“It is in this context that Portugal has competitive advantages to do with its attracting geographic and demographic position and that puts us in a forefront position in terms of European near shoring strategy,” says Tavares.