REALX: Crisis added ‘rocket fuel’ to logistics’ evolution

Top (L to R) Ingo Steves, Otis Spencer, Robert Dobrzycki,
(Bottom) Ben Bannatyne, Tobias Kassner, Richard Betts.

The corona virus pandemic has “added rocket fuel” to the already rapid evolution of the logistics real estate sector and has altered the norms of human society. So said business transformation expert Sean Culey speaking during the REALX.Global virtual exhibition and online real estate conference which opened yesterday (17 September).

Culey said that while people in lockdown have been forced to use e-commerce thus accelerating the demise of large retail malls, the avoidance of handling cash is accelerating the uptake of cashless systems. Similarly, the requirement to be able to work remotely has initiated a boom in working from home while social distancing is causing a decline in group-based activities and the growth of online alternatives.

The consequent acceleration of e-commerce has benefitted the logistics property sector as the next REALX.Global session, Investing in Logistics, confirmed.

Sean Culey.

“Clearly, April and May were more challenging and none of us knew what would happen. Today it is almost business as usual,” said Prologis Europe president Ben Bannatyne.

He said that his company had “dialled down” then dialled back up its forecasts. There will always be demand for food and other products and a significant slowdown is not expected, he said. And he added that in some countries, Germany in particular, occupancy is currently 99% to 100% so rental growth can be expected.

GLP North Europe managing director Ingo Steves said that Germany has become highly competitive for investors in logistics real estate with both yield compression and rental growth occurring. He said that there are examples of logistics yields of 3.5% and sub 3%. “The place to be is northern Europe, particularly Germany,” he added.  

P3 logistics’ chief investment officer Otis Spencer said that the crisis has been “an accelerator” and the demand for logistics facilities close to centres of population has prompted P3 to look more at repurposing brownfield land and buildings in other uses.

Panattoni Europe CEO Robert Dobrzycki also said that occupiers are forcing his company closer to centres of population where development is more difficult.

Built-to-suit keeps demand and supply balanced

However, the preponderance of built-to-suit deals with occupiers means that the demand and supply of space remains in balance. “We don’t do much speculative development and most is based on pre-lettings,” said Dobrzycki. But he added that finance for speculative developments is, anyway, hard to find.

In his earlier session Culey had looked to future technical advances that could facilitate the development of the process of e-commerce fulfilment. Some, such as autonomous delivery drones, are already being tested. Others seem more far-fetched. Amazon has patents for floating aerial and submarine fulfilment centres for instance. Still more solutions are based on older, discarded technology, such as pneumatic tubes for delivering goods.

Garbe Industrial Real Estate head of research Tobias Kassner said that some of these solutions will remain the stuff of science fiction. In Germany, legal and bureaucratic restrictions would make the introduction of such ideas a slow process, he said, even for drones. He said a new mindset will be needed to approach regulations and legal boundaries.