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Frank Pörschke, CEO, P3 Logistic Parks

How would you describe the 2021 real estate year?

Structural tailwinds like the growth of e-commerce continued to support the logistics market during 2021. As a sector, logistics has continued to provide an invaluable and essential infrastructural service to communities experiencing disruption due to the global health crisis, which we see reflected in the elevated levels of demand for logistics space, primarily in Western and Southern Europe.

But the sector also faces a few challenges which intensified last year. New investors – often new or underweight in logistics – are looking to deploy capital, further heating up the market. Large international portfolio sales have also sometimes reached unsustainable pricing levels, forcing established players such as ourselves to consider a shift in our strategic approach to the investment market.

At P3, we completed a successful 2021 with now approximately €7.4 billion assets under management, 6.6 million sq m of warehouse space across 11 countries, and a healthy development pipeline of approximately 800,000 sq m. Lease-up continued to remain strong, highlighted by the successful lease of 100,000 sq m to a single tenant in our BREEAM ‘Outstanding’ P3 Echt development in the Netherlands.

Where do you see the best value and what will be the best strategy in 2022?

Warehouse supply still lags demand, especially in Western and Southern Europe, and our strategy for 2022 revolves around closing that gap by providing quality, sustainable warehouse space in key logistics locations.

In terms of investment activities, we are focusing on large portfolios that are correctly priced, as well as on small portfolios or single assets with interesting return profiles.

Development remains a key growth driver and we will continue to work with new and existing customers on build-to-suit opportunities. Given the undersupply of product on the market, we will consider speculative developments in submarkets that we believe can sustain such activity. We continue to source land, which is also becoming more challenging, and will work closely with local municipalities to unlock attractive brownfield opportunities, which we consider a critical component of any sustainable development strategy.

We expect yield compressions to slowly come to an end through 2022, favouring long-term owners and managers of properties, over trader developers.

Attention to sustainability will become even more important. At P3, sustainability is a cornerstone for creating long-term value for our shareholders, investors, customers, and the communities in which we operate. We view sustainability as a long-term investment that strengthens P3’s operations, enhances our competitive positioning, improves risk management and attracts top talent. More and more of our customers appreciate or even require higher sustainability standards.

What are likely to be the chief positive influences on strategy in 2022?

The rise of e-commerce is a tailwind in our asset class which drives logistics’ growth in Europe. Elsewhere, green finance is a new opportunity for owners and operators which incentivises efforts to decarbonise buildings.

We aim to build renewable, rechargeable warehouses. Innovations in technology such as robotics, automation and electric vehicles are becoming more influential, and these tools need a reliable and affordable power supply. We use construction technology that actively reduces climate impact, and all new P3 assets are ‘solar ready’. We also seek to improve energy performance via thermal insulation upgrades and invest in energy management solutions like LED lights.

Sustainability helps to shape a successful strategy and we consider this from the earliest planning stages. We prioritise brownfield sites which offer re-use opportunities, above greenfields. We are committed to BREEAM certification for our assets. The new P3 Echt building in the Netherlands is a rare example in Europe of a warehouse with an ‘Outstanding’ BREEAM rating. Following COP26, environmental issues will continue to influence a successful strategy.

Investors have witnessed the impact of the global health crisis on other asset classes. Logistics has shown resilience over the past two years and is well placed for 2022.

What do you consider to be the main challenges facing the sector and your company in 2022?

Land scarcity will remain a key challenge this year – especially in densely populated areas – to which the redevelopment and revitalisation of brownfield sites offers a valuable solution. Among the advantages of brownfields is the protection of resources through reduced land consumption. In addition, brownfields create new space in very good locations in regions with scant development area.

Unfortunately, the potential of brownfield developments is not yet fully appreciated by some local governments, resulting in complicated, time-consuming and costly approval processes. The issue of sustainable land development must no longer be a marginal topic: it must be on the agenda of all stakeholders.

The wider economic recovery and the growth of the logistics sector are also being put at risk by labour shortages, as well as by high inflation in Europe and drastic fuel and construction price increases, which could cause further disruption to supply chains.

Looking back at 2021, what has given you the greatest inspiration for the year ahead?

Since joining P3 last April as CEO from the broader real estate and capital markets industry, I have enjoyed working in the logistics sector, which currently does not only outperform other asset classes but is a highly interesting field with a great future. I have been inspired by the P3 team, who prioritises excellence despite the socio-economic challenges of the pandemic. Also, we are observing a flight to the sector by top talent, for whom logistics is a highly attractive career choice, be that in the asset, development, or financial disciplines.

Structural tailwinds are also inspiring – especially the growth of e-commerce – and show little sign of abating, which high-quality providers in the sector can expect to benefit from in the coming years.

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