Original article on Vastgoedmarkt.nl in Dutch: Click here
Logistics is the first thing people invest in after a crisis Investments
Joost Uwents
WDP is executing logistics projects worth €600 million. Despite the corona outbreak, there have been no customers who have cancelled an order yet. On 22 April, WDP, the exchange-listed logistics property investor, posted a 7% increase in earnings per share in the first quarter compared to the same period in 2019. What will the effect of the corona outbreak be on WDP's operations? Five questions to CEO Joost Uwents.
What is the impact of the corona outbreak on logistics? “The crisis has accelerated logistics and retail towards multi-channel. Many households have learned to do their shopping online. When the measures against corona are reversed soon, we will no longer see families going to the supermarket on Saturday morning. They can do something fun with the children instead.”
Corona resulted in a faltering of logistics from China. Will worldwide freight transport and storage in large warehouses still be the norm? “I don't expect a large-scale shifting or shortening of logistics chains. Production that has been moved to China from the Netherlands or Belgium will not return immediately as a result of the corona crisis. We no longer have the knowledge to do the work. Moreover, support is lacking, because production is often accompanied by pollution. The most logical solution to the vulnerabilities in the supply flows is that companies accelerate and improve logistics. One of the ways to optimise supply is to keep larger stocks. This requires warehouses, and we have them in our portfolio.”
What is the effect of the corona crisis on WDP’s occupancy rate? “Our occupancy rate was 98.1 percent as of 31 March 2020, and we expect it to rise. Stocks are currently increasing due to the fact that measures in place to prevent the spread of Covid-19 are still in force. Our customers are renting extra space for this on a flexible basis.”
Can WDP customers still pay their rent? “The vast majority of customers can. Covid-19 has had a high impact for about 20 percent. With 10 percent of our tenants, often medium-sized or small companies, we are working on payment arrangements such as converting from quarterly to monthly payments or loans. The greatest payment risk of an individual customer is less than 3 percent of our total rental income. We can be happy with our spread across sectors. Pharmacy and produce (potatoes, vegetables and fruit) have not been hit hard by the corona crisis. Industry has been, but there are solid companies active in that sector. The difficulties with payment mainly concentrate around retailers in non-food. And they make up less than 9 percent of our customer base.”
WDP has a large pipeline. Are the new warehouses still required as the economy enters a severe recession? “Most certainly. For the first quarter of 2020, we committed €110 million to new investments. It seems we will not reach that level in the second quarter. Customers are now putting their own house in order and are not engaged in growth. Yet it is a lot better than 2009. Client’s lawyers at that time were approaching us to roll back contracts. You don't see that now. We have projects in progress for €600 million. There have been no customers who have cancelled an order yet. The first thing people will invest in after a crisis is logistics.”