Property Management: Shopping centers

from CEUSTERS magazine - September 2021

by CEUSTERS

Offices: Testimonial Touring

WAREHOUSE CALLEBAUT (WDP)

“Belgium initially lagged behind in terms of e-commerce. The pandemic made us start to catch up.” CW The boost of e-commerce

Did the coronavirus crisis give e-commerce (and, by extension, the logistics sector) a significant boost?

Christophe Wuyts: “Let’s just say that Belgium initially lagged behind a little – e-commerce had been a big thing internationally for a long time – and that the pandemic made us start to catch up. Even my parents are now also ordering online, for example.”

Kristof De Witte: “The pandemic has undeniably had a positive impact on the sector and set a lot of things in motion. Previously, there was the ‘Just In Time’ concept. Nowadays, we have ‘Just In Case’. People don’t want to run out of goods, so they want to have a decent stock. Take the current problems with regard to semiconductors in the automotive sector, for example. ‘Just In Case’ is a completely different vision on how to approach logistics as a company. People also have little patience and want things to be delivered very quickly.”

But in order to deliver quickly, your warehouse shouldn’t be too far from your customers...

Kristof De Witte: “This means that demand for a large central warehouse, in combination with various city hubs, is steadily increasing. Which in turn has an impact on the logistics real estate market. Because these kinds of city hubs don’t actually need to be all that large – 5,000m2 or so will do – but you do need the necessary space to accommodate all those trucks and vans. And as I said, there’s not that much land available around here…”

Christophe Wuyts: “Just try finding space for a 5,000 m2 local hub on the edge of a central city. Well, actually, that’s our job. (laughs) In that sense, giving a brownfield business park a second life can be a smart option.” WAREHOUSE ROGUE (WDP)

International but still local

If the Antwerp-Brussels axis is overcrowded, don’t you have to look further and further afield to be able to accommodate logistics real estate?

Kristof De Witte: “The Antwerp-Brussels axis is the place to be if your company focuses on the Benelux. If your scope is wider, you’ve got more opportunities. Take Ghent, Genk or Laakdal, for example. At WDP, we naturally keep an eye on this evolution. We’re constantly scouting good locations, also outside the Benelux and France. Companies first look at logistics flows, then national borders. Only then will they examine how a certain location could affect their business operations. We’re now working with VID from Munich to see how we could anchor ourselves in North Rhine-Westphalia, for example. Our Bavarian colleagues have specific German knowledge of things like taxation, which we ourselves don’t have. What we do have is a network of companies from the Netherlands and Belgium that could be based in that specific region. A winwin situation, in other words.” Christophe Wuyts: “You should look at the logistics real estate market on a micro, meso and macro level. That’s why Ceusters Industrial Agency evolved relatively quickly, from 2 to 9 employees who are active both locally as on the international market. It’s all about picking up on demands and matching these with the right location and the right player. The right location could therefore be in many different places. At least in theory, because in practice, pickings are slim. But no matter how international a company’s scope might be, in-depth local knowledge and anchoring remains essential. You need to properly analyse and understand the market. Just because a company should ideally settle in, say, Dubai, doesn’t mean that they will. If the company has always been based in Lokeren, it won’t easily move away. You need to take that kind of thing into account.” Kristof De Witte: “Local knowledge is essential. At WDP, we’re constantly on the lookout for strategically situated locations. You need to think along with your clients. And anticipate things! Essentially, it’s all about putting together the pieces of the puzzle in a smart way. We strongly believe in the concept of cluster locations, for example. Companies looking to expand don’t really want to move beyond a radius of 15km, let alone 25km. After all, they want to retain their staff who are already so difficult to find. In that sense, a good location is also an essential part of the war for talent. So while it requires some additional investment at the start, we always choose to make new buildings divisible, to ensure expansion or reduction is possible at one and the same site.”

“We strongly believe in the concept of cluster locations.” KDW

Flexibility is key

As with office real estate, flexibility also seems to be the order of the day in the logistics sector.

Christophe Wuyts: “That’s right: this evolution is becoming increasingly clear in the logistics real estate market. Take the concept of a campus of 100,000 m², for example. You can keep clients on a site by being able to respond flexibly to their needs at their existing site, for example by ensuring you have the right of first refusal to adjacent space. Remember: it’s an incredible advantage for a company not to have to move and to be able to simply expand on location. It’s a human story too, as it allows you to retain your employees. Don’t forget that, despite all the robotics these days, the logistics world is still a sector that employs many people.”

Kristof De Witte: “Not everything can be automated. This is also because automation, in relation to the duration of a lease, is sometimes not beneficial at all. Precisely because so many people work in logistics, and because demand for workers is so high, you shouldn’t overlook the aspect of social wellbeing. Which in turn – and quite rightly so – requires the necessary investments in the buildings. Incidentally, flexibility also occurs in other areas. Because we’re dealing with the omni-channel concept these days. Logistics companies now serve shops, wholesalers and individual consumers alike. And that means managing three different flows at the same time.” Flexibility also means being able to foresee which demand will arise for which location and at which moment in time, which is not easy.

Kristof De Witte: “Insight like that does indeed require in-depth market knowledge and cooperation with partners who have an extensive national and international network, just like Ceusters. Flexibility not only plays a role in the event of expandability within a site, but also when it comes to relocations. What should you do in the case of a merger or acquisition? Where’s the best place to accommodate your logistics hub then?”

“It’s important to cooperate with partners who have an extensive national and international network, just like Ceusters.” KDW

Flexibility always comes with a price tag.

Kristof De Witte: “Flexibility naturally leads us to promote the attractiveness of renting in the logistics real estate market. As a company, renting offers you many more possibilities. Which in turn generates recurring income for us. It’s a good deal for all parties involved. In the context of a business strategy, for example, it can be very interesting to think about a sale & lease back.” Although e-commerce has boosted the logistics market, the resulting increase in mobility caused by delivering parcels is putting pressure on the environment. Surely this won’t be sustainable in the long term?

Christophe Wuyts: “As with many things, some nuance would not go amiss. Studies like to cite the number of extra vans on the road these days, but they forget to deduct the people who don’t travel to a shop because they placed their order online. All the same, this is an issue. One that can already partly be tackled with a greener fleet, not to mention delivery optimisation. In these digital times and with the Internet of Things, there are so many possibilities. So why not combine several orders per street? After all, surely not every delivery has to be made within 24 hours? Express deliveries could be offered for an extra fee.”

Kristof De Witte: “Mobility is a very important topic. A property’s mobility assessment report can make all the difference to the property’s attractiveness. In addition, municipalities, cities, provinces and regions often hold conflicting views. This brings us back to the beginning: land and locations are scarce. So we need to adopt a very smart approach.”

Christophe Wuyts: “And smart means building on expertise, with flexibility and sustainability as the guiding principles! It should be clear that the logistics market is primarily an and/and story, not a tale of either/or. Everything has to be taken into account.”

In 2014, Kristof De Witte became Development & Acquisitions Director at WDP (Warehouses De Pauw), where he was later promoted to General Manager for the Benelux, the Netherlands and France. WDP is a listed family business that specialises in the development and rental of logistics real estate. Over the past four decades, the company has grown to become the market leader in the Benelux. In 2017, WDP was awarded the title of Company of the Year.

Christophe Wuyts is head of the Industrial Agency at CEUSTERS, Board Member of SIOR* Europe and Belgian representative for IRELS**

* SIOR, the Society of Industrial and Office Realtors, headquartered in Washington, DC is active in 32 countries and is recognised as the leading professional commercial and industrial real estate association. ** IRELS, the only international network of independent professionals specialising in the Logistics real estate sector.

Built-to-suit development by French-Belgian partnership

Laurent Sabatucci has been Associate Director of EOL since 2000. EOL is a French broker that specialises in logistics real estate. Like Ceusters, EOL forms part of the European IRELS network that operates in 12 countries. Ceusters is the go-to Belgian partner when international questions arise about real estate within this network. “When Carrefour contacted us about the construction of a production and distribution facility in Belgium replacing the outdated pastry factory of subsidiary Eclair, we approached Ceusters,” Laurent Sabatucci explains. “Ceusters proved to be a very valuable partner, both for us at EOL and for Carrefour. Thanks to its database and knowledge of the local market, they were able to very quickly carry out a full screening of the market and provide a comprehensive overview of possible sites. Ceusters even drew up a map of all the sites available for logistics, as well as the sites that could be converted to that purpose. They were also able to quickly and thoroughly benchmark the final deal.” This ultimately resulted in a deal between Carrefour and MG Real Estate for the construction of a project of approx. 17,000 sqm in Ternat, Forty Park.

We also asked Laurent Sabatucci about the two major themes discussed throughout this magazine: flexibility and sustainability. “I’m mainly seeing flexibility in the design of our buildings. We’re providing more and more mezzanines, for example, for the preparation of orders – which rapidly increased during the pandemic, by the way. In France, for example, e-commerce has doubled since Covid-19 emerged. Almost three times more logistical area is required; this calls for the ability to switch in a fast and flexible manner. Precisely because the supply itself is not sufficient. The demand for more logistics space is at odds with the call for a clampdown on the construction of large logistics hubs in certain regions. For this reason, we’ve entered into an environmental charter within our sector. After all, the future lies in sustainability.”

SUPER

warehouses in Belgium

Christophe Wuyts

MRICS SIOR GHENT LOGISTIC CAMPUS (HEYLEN WAREHOUSES)

The Belgian logistics sector is booming. An estimated 1.2 million square meters of new built warehouses will be added the next 18 months. What’s striking is that the warehouses are becoming larger, more sophisticated, and more diverse, so-called super warehouses. Other observation: rents keep rising. You currently pay 58 euros per square meter for a warehouse in a prime location near Brussels, which is an absolute record. The reason? Even during this COVID-19 pandemic, the demand for storage space remains extremely high and will increase further due to growing e-commerce. A record breaking three million+ square meters of new, 30,000+ square meter logistics warehouses were built between 2013 and 2021. That’s equivalent to 443 football fields, or 1,250 square meters per day. This number is only expected to increase in the coming years. This year, already about 850,000 square meters of new warehouses in Belgium are in development. Even more logistics space will come on the market in 2022. The increasing demand for such warehouses is a direct result of the COVID-19 pandemic and the fact that we are all ordering more online. Shops and businesses are obliged to build up more strategic stocks. E-commerce is flourishing like never before and the demand for storage capacity is very high. For many companies, online sales proved to be the lifeline during the lockdown. This will continue in the coming years. There’s still space for development in Belgium, especially in the provinces of Limburg and Liège, which are cheaper than Antwerp or East Flanders. The Netherlands has been on the radar for years, but the market for new large logistics centers is shifting to Belgium right now. Not only were more distribution centers added, but they also became larger, more sophisticated, and more diverse. More than 40 of these so called “mega distribution-centers,” or “super warehouses,” have popped up in Flanders. A good example is the Heylen Warehouses logistics hub of 150,000 square near Ghent or the 200,000 square meters logistics park Genk Green Logistics. There are more of that order of magnitude in the pipeline.

“Every day, 1,250m2 of warehouse space is added in Belgium.”

The warehouses are getting bigger and bigger because logistics are increasingly evolving. Today, we see more automation or handling by robots. For example, a large two-story distribution center will be built near Brussels. The Port of Antwerp-Bruges and East-Flanders, with North Sea Port, are doing particularly well. About half of all warehouses were built in these provinces, while some were built on the border with Brussels. In 2019, for the first time ever, Belgian take-up rose to more than two million square meters of warehouses and in the first semester of 2021 the take-up was even 55 % more than in the first semester of 2020. The consequences of this boom on the warehousing market can be seen clearly. Barely 0.60% of all warehouses in Belgium are currently not is use. This is a historical low level of vacancy, making Belgium a leader in Europe as the immediately available space has been leased in record time. There is an acute shortage of available space in all markets. As a result, prices— which remained at the same level year after year—are beginning to rise slightly. Today, the average headline rent is 43 euros per square meter; in 2018 and 2017, it was 42 and 41 euros respectively. In 2021 it has risen to the highest (prime) rent Belgium has ever seen, at 58 euros per square meter in Brussels.

Christophe Wuyts

Head of the Industrial Agency at CEUSTERS - MRICS SIOR

“Belgian (prime) rent prices are at an all-time high.”

For years, Belgium lost large warehouses—and therefore income and employment—to the Netherlands, due to better regulation of night work. But that time is gradually coming to an end. That Belgium will play a key role for logistics in Europe in the coming years is fate. Not only will more stocks be needed because of e-commerce and—due to COVID-19—more just-incase supply chains, but also our most strategic location remains important. Rents in the Netherlands are 20% higher on average and land prices have also risen enormously. Belgium can better position itself as a cost-efficient alternative in this respect. Logistics providers that want to establish or grow in Europe should therefore consider Belgium. Moreover, they have a hard time finding employees in our neighboring country, the Netherlands. Lastly, real estate experts say that Brexit accelerated our market. When the UK became an external market, businesses needed a hub within the single European market. Belgium makes for an interesting gateway, partly because of the presence of the European institutions, which is believed to give our market an extra boost.