Changing face of Logistics as ESG factors are taken on board

The success of Logistics as an asset class has transformed the sector and changed people’s perceptions, experts agreed at Real Asset Media’s European Logistics Investment briefing, which took place recently at MIPIM.

Logan Smith.

“The social impact aspect of logistics has come to the fore as the sector is a leader in automation and jobs have been changing,” said Logan Smith, senior managing director, head of European logistics, Hines. “They are now professional, highly qualified jobs, not the dead-end, low-skilled jobs of ten years ago. Communities and cities are realizing that logistics is a good thing and are embracing it.”

The increase in transparency and the attention paid to ESG factors has helped this shift in perception, but it has been a long and slow process.

“Now ESG is on everyone’s agenda, but logistics developers have been at the forefront, because they had to meet municipalities and explain why they should have that warehouse on their land,” said Smith. “They had to be transparent and explain not just about the benefits of solar panels on the roof, but also about the materials used in the building, the life-cycle of the asset as well as the relationship with the local community.”

The hope is that local authorities’ perceptions will change, as finding land and getting building permits are two of the main challenges for the sector.

“In the UK some towns and boroughs want logistics development because it brings employment, unlike residential,” said Daniel Harris, senior managing director, head of European investments, Cain International. “With rents so high because land availability is so restricted, people are thinking what is the most appropriate use for the land.”

Robert Cotterell.

In the UK, permits depend on the local authority, with some places willing to permit land for logistics development and others refusing. In Europe things vary from country to country.

“Germany and France are restricting requirements for logistics and some countries have a moratorium, but it’s still possible to find pockets of opportunity,” said Robert Cotterell, head of investment Europe and head of UK , Cromwell Property Group.

In countries where job creation is not an issue there is less incentive for local authorities to give permits.

“In Germany or the Czech Republic unemployment is low so there is more reluctance to allow greenfield developments,” said Frank Pörschke, CEO, P3 Logistic Parks. “In general it is difficult to find available land and to get building permits approved, so we are pushing developments into brownfields. We’ve accepted the challenge and see it as an opportunity, even if there are costs.”