‘Staggering’ growth expected in last-mile logistics in the UK

Andy Harding, Head of Industrial and Logistics, JLL UK

Andy Harding, Head of Industrial and Logistics, JLL UK

The growth of logistics in the UK shows no signs of slowing down, particularly the e-commerce last mile market, Andy Harding, Lead Director, Industrial and Logistics, JLL, told Real Estate Day.

‘The British Property Federation have estimated that for every new home to be provided in London an additional 40 square feet of logistics needs to be provided,’ he said. ‘Now if you translate that amount of square footage versus the number of homes that need to be provided as set out in the draft London plan, which is 66 thousand new homes per annum until 2040, that means that 2.5 mln sq ft of logistic space should be provided year-on-year till 2040,  which I find quite staggering’.

In future on the outer edges of urban logistics smart markets there will be fulfilment centres which will gather the goods from the ports and from the airports. Then there is the challenge of bringing the goods into the city, juggling problems like the ultra-low emission zone, congestion on the roads and lack of electric vehicles.

‘We are finding that some of the e-tailers and e-commerce operators are trying to be smart now, so they are looking at having operations in redundant basement car parts, office spaces or railway sidings,’ Harding said. ‘They’re trying to find opportunities to get their goods into the city centre easily and without fuss, so there’s a whole raft of strategies and attempts to intensify sites, as well as bringing in those Singapore-style multi-level buildings much closer to the city centre’.

Nothing is being built at present, but a lot of projects are being planned.

‘There are at least 20 schemes being considered in what I would call inner London,’ he said. ‘They are a mix of multi-storey to multi-level, quite a number of them serviced by cargo lifts, together with co-location space where residential or retail is sitting either alongside or above a logistics provision. There are also consolidation centres, which are logistics buildings  on the fringes of the city which are servicing either shopping centres or large office buildings, together with basement car parks or redundant offices, all being considered for some form of e-commerce provision’.

There is so much activity in this market that JLL has just formed a new City Logistics Group, which provides a combination of pure agency advice, research, sustainability planning and capital markets/investment advice. ‘There is sufficient work out there for us to have a dedicated team’, he said.

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‘London will lead the way in multi-storey warehouses’

Andy Harding, Head of Industrial and Logistics, JLL UK

Andy Harding, Head of Industrial and Logistics, JLL UK

Europe is set to follow in Asia’s footsteps: London will be the test bed for the multi-storey warehouses that have become increasingly popular in Singapore and other Far Eastern cities,  Andy Harding, Lead Director, Industrial and Logistics, JLL, told Real Estate Day. 

‘I’ve just come back from Singapore and before that Hong Kong and Shanghai on fact-finding missions to understand how that market is accommodating the growing need for logistics against the backdrop of lack of land supply, and the clear solution is to start building high-rise warehousing,’ he said.

In Singapore now almost 100% of the warehousing out there is now what they call ramped up warehousing, which is multi-level warehousing accessed via wide ramps to allow HGVs to go both up and down.

‘They are maybe five or six storeys, each one providing proper well-serviced warehousing with decent floor loading,’ Harding said. ‘There are already signs that those types of products are being looked at in Paris and Germany, but it is in London in particular that we are going to be seeing multi-level buildings coming very very shortly’.

The UK, which is the most developed e-commerce market in Europe, will once again lead the way in this field, JLL predicts.

‘London is going to be the test-bed for both multi-storey and ramped-up warehousing, he said: ‘We’re going to be seeing those coming into London first, prior to them going to some of our main cities in the UK’.

The ability of logistics companies to recruit is often an issue, while health and well-being have come to the fore as issues that employers and landlords must take into account. Both these factors are being reflected in the new-style warehouses that are being built.

‘In Singapore it was quite clear that for logistics companies providing multi-level accommodation the provision for the well-being of their staff is paramount,’ Harding said. There are quality restaurants and cafes, crèches, gyms, gardens, quiet areas and collaboration areas being provided.

‘There is now competition between the occupiers to ensure that their staff are being provided with that type of overall package,’ he said. ‘In the UK we are starting to impart that type of thought process on our key developer and landlord clients’. 

Better amenities are already being provided on some of the major distribution parks and business parks throughout the UK, but this provision is being stepped up.

‘I think now in some of these major buildings that will ultimately be coming to the UK that amenity provision is going to be an important factor,’ Harding said. ‘Particularly in multi let buildings where you can have more than one occupier providing them’.

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‘With 5G coming buildings will become more important’

Matt Bloxham, Senior Analyst, Bloomberg Intelligence

Matt Bloxham, Senior Analyst, Bloomberg Intelligence

Matt Bloxham, Senior Analyst, Bloomberg Intelligence, tells Real Estate Day that a lot more infrastructure will have to be physically built into buildings in order to support super fast speeds, smart cities and autonomous driving, and this is a massive opportunity for real estate owners to have a more dynamic and integrated relationship with network operators

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‘From IKEA to INGKA, a growth strategy backed by a €5.8 bln investment’

Vasco Santos, Global Sales & Leasing Manager, INGKA Centres

Vasco Santos, Global Sales & Leasing Manager, INGKA Centres

INGKA Group has a new three-pronged international growth strategy backed by a €5.8 bln investment, Vasco Santos, Global Sales & Leasing Manager, INGKA Centrestold Real Asset Insight.  

INGKA, a name that pays homage to Ingvar Kamprad, the founder of IKEA, controls the shopping centres and other activities of the group.

‘We have launched a growth agenda with three main goals,’ he said. ‘First, we want to increase our international presence. We will move into the Indian market, which we think is very interesting and has potential. We will also double our presence in China to 250,000 m2. 

One single mixed-use project in Shanghai represents a €1 bln investment’.

The second goal is to increase the number of smaller Ikea stores in city centres. It has opened Planning Studios in central locations in London, Madrid and Stockholm and, more recently, the first city-centre concept store opened in Paris, a 5,400 m2 shop in Place de la Madeleine, near the ChampsElysées

‘Our strategy is to be closer to where our customers are, so we are going into the city centres with mixed-use projects in cities like Paris, Brussels, New York and Moscow,’ Santos said. ‘It is very exciting because they are very different projects, each one specific and tailored to its location’.

The third and final plan is the revamping of existing stores to improve them but also to be more relevant and customer-centric.

‘We are transforming our existing portfolio and sometimes repurposing the stores,’ he said. ‘It is a substantial investment for us. In Russia alone we are investing €1.8 bln in the coming years’.

The transformation reflects a new thinking about the role of IKEA stores in the city and the community, Santos said: ‘In order to be customer-centric we need to be relevant, which means going beyond the retail element to include components that people need. These will vary from country to country and from city to city, but they tend to include Food&Beverage, leisure, entertainment, working spaces and meeting places’. 

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‘In retail there are more opportunities than challenges’

Henrike Waldburg, Head of Investment Management Retail, Union Investment Real Estate

Henrike Waldburg, Head of Investment Management Retail, Union Investment Real Estate

There is too much pessimism in the market on the retail sector and the negative image does not reflect the reality on the ground, Henrike Waldburg, Head of Investment Management Retail, Union Investment Real Estate, told Real Estate Day.

‘It is not a secret that retailers are going through challenging times,’ she said. ‘Thereis negative sentiment in the market but the reality hasn’t changed much. If I look at our portfolio at Union Investment, sales are slightly down but footfall went up and rents went up so the reality is that a good quality portfolio is not reflecting the negative sentiment in the market.’

Some areas seem to be performing much better than others. ‘There will be winners and losers and we have an idea of which are going to be the winning formats in retail going forward,’ Waldburg said. ‘We recently did an investor survey and it seems that many investors share our view that the outlet sector still looks pretty good, the large dominant shopping centres are still doing well and so is everything related to a very good city centre location’.

Union Investment manages a big mixed-use portfolio and is optimistic about the potential of mixed-use. ‘I find the transformation of retail very interesting and the chance to introduce hotels, offices or other new uses to former retail buildings, especially in the upper floors’, she said.  

Retailers will have to keep adapting  to far-reaching changes in consumer habits and ‘the  negative narrative we saw in 2018 is set to continue this year,’ Waldburg said. ‘There’s the reality of partially falling rents or at least rents being renegotiated by tenants who have a lot of power to do so’. 

Another negative factor is the increased capital expenditures in operating shopping centres. ‘For a long time malls have been considered as having a very favorable capex profile as you didn’t do need to do much compared to other asset classes such as offices or hotels, but that is changing and leading to negative sentiment towards the sector which is sometimes exaggerated,’ she said.

In order to keep up to speed on changes in the sector it is important for industry professionals to contantly exchange views and experiences, Waldburg said: ‘We have launched an investors’ forum at ISCS with people who represent over €600 bn AUM, €160 bn of which in the retail sector, and the sense of the discussion was that times are challenging but that there are still opportunities out there’. 

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‘How to attract six generations of consumers’

Ken Hughes, Consumer & Shopper Behaviourist

Ken Hughes, Consumer & Shopper Behaviourist

The retail experience is constantly changing and must be curated and tailored very accurately to each different group, from pensioners to baby boomers and from Millennials to Gen Z, Ken Hughes, Consumer & Shopper Behaviourist, told Real Estate Day.

‘The question is how does retail stay relevant, and the problem with relevance is that every consumer generation changes what that is,’ he said. ‘Now you have everything, from traditional consumers aged 80 to baby boomers with a huge chunk disposable income and a lot of time and you’ve got the Gen X you’ve got the Millennials you go up to Gen Z you got Alpha generation, so there’s six generations of consumers to think about’.

They all have different value systems which need to be understood in order to tailor the experience. 

‘For Gen Z the main value is instant,’ Hughes said. ‘They want everything instant, seamless and frictionless, in contrast to baby boomers who were used to things not working first time and trying again. This doesn’t wash with Gen Z, so if you’re selling technologies, for example, it has to work first time’.

All consumers now want a digital experience and expect to be able to buy online, but the new generations also ‘expect the sales assistant to recognise them when they walk in store,’ he said. ‘So the system should pick up they were on the website and bought something yesterday, maybe facial recognition technology will come in so the information can be fed to the sales assistant and they can recognise the person and tell them to buy the shoes that go well with the jeans they bought yesterday. This might seem amazing to a babyboomer but it is what Gen Xers expect’.

Retail experts’ task is to create and curate the experience in order to stay relevant, while investors will focus on the bottom line and might worry about profitability and about who is going to pay the rent, but the two things are connected. 

‘Of course there’s a path to purchase somewhere along the way,’ Hughes said. ‘But in order to be successful the retailer must reflect on what the function of the store is. Selling can be done online, so why open a shop? Is it a marketing communication platform for the brand, is it a centre of experience for the product or service, is it a way to plug into the community of consumers you are trying to reach, these are all big questions’.

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‘We adjust our strategy in Europe to find opportunities’

Matthias M Brodeßer, Head of Transaction Management International, Warburg HIH Invest Real Estate

Matthias M Brodeßer, Head of Transaction Management International, Warburg HIH Invest Real Estate

A defensive core strategy is compatible with investing in controversial countries like Poland and Hungary as long as the risk/reward balance is right, Matthias M Brodeßer, Head of Transaction Management International, Warburg HIH Invest Real Estate, told Real Estate Day. 

‘We’re investing predominantly on behalf of German pension funds, who are probably the most risk averse in the European universe, so that means we’re a core investor’, he said. ‘We are a pan-European investor, but we feel that Europe has changed over the last couple of years, so we have adjusted our strategy’.

Warburg HIH now focuses predominantly on three countries and specifically on three cities: Vienna, Amsterdam and Berlin. 

‘We focus on the office market in Vienna for defensive reasons, because our experience has shown that there is little or no volatility in terms of rent and pricing and it is a great place to be when you are expecting a downturn whenever the downturn,’ he said.

Amsterdam offers ‘more of cash return’,Brodeßersaid, while Berlin ‘offers tremendous growth on office rents and for that reason, given the current price levels throughout Europe, we feel that there are good grounds for investing there’.

Political risk is a concern but it can also offer opportunities as long as you balance risks and rewards, he said. ‘Clearly we discuss it with investors, because we make a decision now that will last for the next ten years. But we must also take into account the fact that countries that are controversial also offer better yields’.

For this reason, Brodeßer said, ‘in the last couple of years we invested close to €400 mln in Poland and now we have a deal under offer in Budapest, for the first time ever, which offers some premium on the yield’. 

In terms of sector, offices are in Warburg HIH’s DNA, he said, ‘but over the years we have built up a great retail team, so offices and retail are the two asset classes we’re focusing on. However, there’s an increasing investor appetite for hotels for the long-term cash flow, and also because tourist numbers are increasing at a rapid pace in most countries in Europe’.

Another sector that investors are interested in is logistics, Brodeßer said: ‘These days you cannot avoid logistics, because of the success of e-tailing and the increase in online shopping. We think it’s a growth sector so investing in logistics is also a defensive strategy’. 

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Retail: New store concept aims at flagship pop ups across Europe

Ilona Taillade, Founder and CEO, FÖMO Store

Ilona Taillade, Founder and CEO, FÖMO Store

‘Retail isn’t just retail anymore, its a media channel, and it has to be omni-channel’ and the new concept FÖMO Store, the first of which opened in Gothenburg this year, is designed to provide retailers with the opportunity to test new markets at low risk, according to Ilona Taillade, Founder and CEO.’ The strategy is to create flagship pop up stores across Europe’ and to have ‘at least one store in each country all around Europe’ focused on ‘where retailers want to be’ so that they can ‘create a retail roadshow’

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‘The investment climate in Egypt is very positive’

Ahmed Shalaby, CEO and MD, Tatweer Misr

Ahmed Shalaby, CEO and MD, Tatweer Misr

Egypt has become an attractive destination for investors looking for opportunities in real estate, Ahmed Shalaby, CEO and MD, Tatweer Misr, told Real Estate Day.

‘The investment climate is very positive’, he said. ‘Investors who come to Egypt can get high yields and good exit scenarios. All the factors are in place to make it happen’.

Tatweer Misr is developing three large mixed-use schemes that combine residential, hospitality, retail, offices, entertainment and leisure facilities. 

One is on the outskirts of Cairo, near the administrative capital, and in addition to residential, retail and office component it will also host the first American international campus in Egypt, with a secondary school and a University. 

‘High quality education is badly needed in Egypt so this is an important step,’ Shalaby said. ‘We have just signed an agreement with the New Jersey Institute of Technology, a very prestigious American university which will make a real difference to the development and to Cairo”. 

The group is also at the delivery stage of the initial phase of two second home luxury destinations, Monte Galala on the Red Sea and Fouka Bay on the Mediterranean, on the North Coast of Egypt. 

‘We like having a diversified portfolio’, he said. ‘We like to say that we do not just build real estate but we like to create communities so we pay attention to every single detail’.

Sustainability is a key principle in all developments, Shalaby said: ‘We are focusing on all aspects, we do a lot of urban mobility solutions inside our developments, water treatment for irrigation, recycling, waste management, collection and recycling’.

Another important factor is innovation. ‘We focus on the design itself and how to make it unique, but we have also signed agreements with world-class partners to provide high levels of smart tech solutions in our communities,’ Shalaby said. ‘For example we partnered with the Schneider group to develop a smart hub to manage all our facilities’.

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‘A lot of opportunities are emerging in Europe’

Damian Harrington, Director, Head of EMEA Research, Colliers International

Damian Harrington, Director, Head of EMEA Research, Colliers International

Offices and retail are still taking up most of the investment but in Europe the real momentum is behind residential, industrial, hotels and development, Damian Harrington, Director, Head of EMEA Research, Colliers International, told Real Estate Day.

‘In terms of the trends that we are seeing, when we look at investment flows there is a lot more activity moving into residential in particular, globally and in Europe, and a lot more investment going into the industrial sector,’ he said. ‘But we’re also seeing retail coming back’.

Colliers has done an analysis of major global investors who are diversifying globally from a range of domiciles and looking at where their holdings were in 2010 relative to where they are now. The research shows that ‘offices and retail still take up the lion’s share but the momentum is behind other sectors,’ Harrington said. ‘We see a lot of money going into residential, a lot into industrial, quite a lot into hotels but a huge amount into development’.

At the moment there are many opportunities emerging in different European cities. ‘They are emerging at different paces and a lot depends on the infrastructure, which is really changing how cities work’, he said. ‘Regeneration is really being driven by infrastructure’.

One example of this is Paris, which, according to Harrington ‘is going to be a very interesting play over the next 10-15 years’ with the Grand Paris project and the upgrade and expansion of the metro system. 

‘Big occupiers have already started to move out to the inner suburbs and it’s spreading the city around and changing the amount of investment opportunities that are available’, he said.

Mixed-use is all the rage at the moment, but ‘it is important to get the mix right’, Harrington said. ‘Residential and retail is an obvious combination but there is growing demand for logistics as well. Within a city you can’t just do logistics on its own because the rental value will not drive growth development value to match, so you have to blend it with other uses’.

The same thing applies to retail, which is now all about omni-channel and how logistics and retail can work together. ‘But retail works really well with residential and offices because they drive the demand for the retail,’ he said. ‘It’s all about getting it right and taking into account public transport which is a crucial factor. But, even though we are going through a cyclical cooling of the market, there are going to be a lot of opportunities across many different cities in Europe’. 

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