In EuropaProperty’s latest online forum covering the warehouse and logistics market, sponsored by CTP Invest and supported by media partners Euro Logistics, panellists discussed the ongoing effects of the COVID-19 pandemic on the sector, including the short and long-term effects and how the situation is bringing many opportunities and challenges to the industry.
The panellists agreed that the warehouse and logistics sector is probably the most resilient to the crisis. Pointing out that some customers, like e-commerce giants, are under huge pressure, demand wise. “They are not slowing down development, they are expanding. Because of the lockdown, there is strong demand for customers who need short-term storage,” commented Robert Dobrzycki, CEO at Panattoni Europe.
For example, Amazon has never had a busier time than this. “I think there will be a correction in six months,” Dobrzycki said. “Beyond this period, we will see an uptick in demand for buildings. Probably, we will also see a push from retailers as they become less reliant on bricks and mortar shops. I think this crisis has accelerated the need for e-commerce in the region by several years. This crisis is forcing people to go digital, so there will be much more demand in 6-12 months,” he said.
“At present, we are fully-active with around 1 million sqm under development, which we are fully committed to,” commented Bert Hesselink, Group Business Development Director at CTP invest. “There is no lack of labour yet, and everything is on schedule. What we are seeing is that now we have to manage our business slightly differently. We are addressing new requirements from new tenants. However, some companies are holding off a bit. But, in general, things are going to plan. We don’t have any difficulties at the moment, so no problems with meeting our development timelines.”
Dobrzycki added, “What is also happening in our business, which is very good, is that people are making important decisions every day, positive and negative, they are being very decisive. So, we know where we stand. A lot of tenants have been directly affected by this crisis, we are seeing a lot of decisions being put on hold as a result, this is creating a different dynamic for us,” he said.
“But we have seen some different opportunities too,” Dobrzycki continued. “What is encouraging is that some of our clients are redirecting their whole business to e-commerce, which usually takes years of work, into a few days of development. This trend has accelerated in the last few days. For example, one customer, who is a large restaurant delivery company, almost overnight, developed a website announcing that they are running from an internet shop, and this is a major company. This is how some businesses are reacting, which is very encouraging for this sector,” he said.
On the current challenges and changes to ongoing development sites, Bert Hesselink, said: “We haven’t faced any huge issues in the Czech Republic. However, it is mandatory to wear a face mask and you keep your distance. In some location’s authorities are checking on you. They will give you a warning if you don’t abide by the rules. But overall, it’s ok. What’s more complicated is border controls, for example, if you need to bring in a specialist from abroad. Supply problems are still manageable for the moment. Robert Dobrzycki, added, “Masks are not mandatory in Poland; however, our contractors and site managers are insisting that masks are worn and all health & safety measures adhered too.”
Commenting on the effects to the investment sector, Robert Dobrzycki, said, “Transactions that were supposed to close just a few weeks before the outbreak are still being closed. However, new commitments are very slow, people are taking a wait and see approach. Some investors are closely monitoring this situation and are still proceeding with their investments. Each investor has their views. It is encouraging that we have some investors who are observing the market, and not paralysed by worst-case scenarios. An obvious outcome of the situation is that construction costs will come down and land prices will drop. Also, things are going to be tougher in the next quarter so if you factor in all these pieces and take in the historical prices the opportunities are there and some investors are proceeding. There is an end to all this. If you are investing money into real estate, industrial and e-commerce developments are probably the best place.”
On helping tenants in these difficult times Bert Hesselink, said, “Obviously if a tenant is struggling, we will sit down and discuss how to figure out some short-term relief. We are assuming this will be around 3-6 months. In the long run, we hope this will pay off. However, we need to wait and see what will happen. We have to be careful. We also have obligations to make.”
With the on-setting trend of deglobalisation and companies moving their operations to CEE instead of China, Robert Dobrzycki said, “Near-shoring is more popular now. Some clients that were moving to China will now bring their businesses closer to the customers in CEE. It is a clear trend. Supply chains and production facilities are now more diversified and closer to the need. CEE should benefit from it. We are in discussions already. In the long-term, this is good news for the region.”
Bert Hesselink added, “Long-term, we expect to see a shift in supply chains diversifying away from China. Companies we have spoken to have made it clear that we can expect a shift in production and supply-chains closer to demand markets/consumers (near-shoring) and greater acceleration of automation for on-shoring. We are dealing with a healthcare company which was planning to open a plant in China, now they are having second thoughts and want to move production to Central and Eastern Europe.”
Dobrzycki concluded, “Like any crisis, this will not last forever. We have to work day by day to get through it, to keep our businesses safe. Our sector will be in amazing shape after the crisis. This is the main commercial asset class now going forward. Hesselink added, “In the mid to long-term we are very positive about the region with the acceleration of trends in near-shoring and e-commerce.”
Organised by Europaproperty.com, the Warehouse and Logistics forum is part of a bi-weekly series of online discussions keeping the region up-to-date on the everchanging impact of the COVID-19 pandemic on the commercial real estate sector.
Main Sponsor: CTP Invest, a full-service commercial real estate developer which builds, manages and delivers custom-built, high-tech business parks throughout Central and Eastern Europe. Digital Partner: EDM, Media Partner: Euro Logistics.
