Christian OllerCountry Manager of the logistics company in prologue Spaina few months ago he submitted his project to occupy his company. country Nissan in the free zone. Later, his project reflected a trend in the logistics industry and his ambition to provide modern two-story facilities to companies that would be located on a suitable site to encompass the Barcelona region. Finally, he acknowledges that the specifications imposed by the reindustrialization commission make it difficult to operate an area of more than 500,000 square meters near Barcelona that is economically viable. In addition to the Free Zone issue, it also answers the point the logistics industry has reached after record years. multinational prologue It manages one and a half million square meters of logistics platforms in Spain. He predicts a 9% to 14% increase in rents, a 30% drop in prices for industrial developable land, and the end of the logistics ‘boom’ of recent years.
How do you evaluate the conclusion of the public tender for Nissan’s land in the Free Zone?
Goodman’s hands. A competition was set up. We were calmly analyzing and presented a project that made sense at the time, but the reality is that the uncertainties created by staying responsible for land, which is an occupation component or necessity for the electromobility industry, for other uses or activities other than those related to the overly rigid electric vehicle that does not allow, it The commercialization of the area was very strict. Goodman must have found a way to bridge the risks and be more confident that he can manage that land to focus on reindustrialisation.
Need for support for electromobility…
The logistics project was too far down to specifications. Personally, I would be happy to have all Nissan staff move into new industrial projects and protect the industry.
But I doubt this target… could it be a hidden logistics target?
I understand it’s tough. There was the law firm Roca & Junyent and the Free Zone Consortium designed a competitive process. I don’t think this is a secret logistics project. There is a small percentage of logistics and a much higher percentage of industrial. If it had been logistics in the end, it would have been a scandal and could not be objected to. Seriously made. They are unique lands. In the end, it would have been a scandal if the land had not been for industry.
Are you planning to participate in the competition?
We believe in the goodwill of companies. It will be an industrial electromobility project with the logistics part being one of the most attractive parts. The specifications create windows for year-to-year expansion of very specific logistics uses if the industrialization project eventually needs to be smaller. The reindustrialization project has been highly preserved.
Have other companies that filed for bankruptcy threatened to file for bankruptcy?
There will be resources if reindustrialization targets are not met. There cannot be a store that is not related to electric vehicles. If there is storage of other types of products, it will increase the resentments more than once. And we too.
Will they check to see if the specification requirements are met?
We will be on standby. But as a company, our path continues. We follow the market very closely and we want to continue to grow in Catalonia, Madrid or Valencia. What was a good project? Yes, what are gorgeous floors? Certainly. But getting into a space, hiring it, seeing who was the right customer… It was difficult to fit it into a flexible business project.
At what prices is the logistics square meter currently paid?
Land prices are very variable. It can be 600 euros per square meter in Sant Boi, 70 or 150 euros in Lleida. Free Zone and L’Hospitalet at high prices, but less than a few months ago.
Are the ships devalued?
Yes, they fell easily 15% last year.
Is this trend continuing?
Yes, it will continue in the next two months.
is it redundant?
Asset price adjustment was made. Feedback has expanded. If more profitability is sought in the investments made, less money is paid to the asset. Land prices should decrease by 30%.
Have the construction costs of the warehouses increased and should this affect the fall in the price of industrial land?
Construction cost rose and stabilized. But stay high. Financing costs have also increased. Entrepreneurs of logistics facilities seek profitability for the investments made. Therefore, a residual calculation is made that gives the maximum price payable for the land, the entrance fee, because the remaining costs are given to you. In order for the logistics investment to be profitable, the land price must decrease by around 30%. Otherwise, it is not possible to build new logistics warehouses.
It is not clear that all influencing factors are constant.
Usable land is getting less and less. It is practically empty in Barcelona’s first crown. And all existing land needs planning, legalization processes with new costs. If construction costs are high, financing costs are high, and rents have not yet risen to previous levels, the only remaining variable is the land price.
And rents are rising.
If space is scarce and demand remains strong, rents will continue to rise. Rents will go up this year. Another issue is that logistics companies can pay higher rents for their warehouses. But if you need a specific place, you will have to pay.
However, uncertainties about electronic commerce continue…
There are four levers that will continue to attract the logistics industry. Selling “online” has plateaued, and it’s true that companies like Amazon have come to a standstill with more space than they need. That doesn’t mean it won’t go on sale, but it is in the stabilization phase. But there are companies that continue to develop their operations ‘online’ and need warehouses. The growth of e-commerce will continue because we are still below other European countries.
Talk about more leverage supporting growth…
The second leverage is asset obsolescence. Low, non-environmentally certified, non-functional warehouses… New modern logistics platforms will be needed. Another leverage is the repositioning of industrial facilities, ‘nearshoring’, and shifting of production to areas close to consumption. It’s still in its infancy, but we’re already seeing it. Companies that need to manufacture parts store the finished product. We have an electric trial motorcycle assembler in Sant Boi. You turned a warehouse into a production line. Emergency stock also encourages having more warehouses. This share is up 12%.
However, the complex macroeconomic situation may affect the consumption and activities of logistics customers.
Layoffs will continue due to inflation. Consumption will decrease. This will continue to happen, no doubt. However, the situation was less serious than anticipated. Yes, we are in a recession, but this is mild. There are counterweights.
As a business manager, have you decided to keep up with the pace of investment?
Yes, we will continue to grow by purchasing companies, land or assets, but with discipline and at the right price. Last year, parent Prologis bought the Duke company for 30 million. Such operations will continue to be carried out.
And in Spain?
Our most important markets are Madrid and Catalonia. We are finishing an area of 40,000 square meters in Guadalajara and we have three interested customers. It is a modern building with a usage height of 14 meters. The general standard is 11 meters. In case of current land shortage, we increase the height of the logistics warehouses. It eventually equates to about 60,000 usable square feet.
A project similar to that proposed by Prologis for the Nissan estate…
Yes, new architectural solutions are being developed to keep prices under control.
But is there any surplus?
There was something in the Madrid area last year. Barcelona is lacking. With less than 2% availability, it reaches 7% in Madrid. In general, rental prices will rise as logistics sells faster than warehouse supplies.
How much will the rents payable on logistics platforms increase?
This year, they will increase between 9% and 14% on average.
It’s hard for any company to accept this rise…
Well, you won’t be able to switch stores. Or you will have to look for savings in other areas. Ultimately, companies tend to focus on specific activities where synergy is achieved. One idea is to condense several warehouses into one more modern warehouse. Or move closer to or away from the consumer to save on shipping costs or labor. Operating costs do not need to increase at the same rate as the rent paid for the logistics platform.
Self-consumption of electricity, for example…
This is one element of upgrading new facilities that should be highlighted. Everything must be put in context. Finally, the law of supply and demand signals an increase in prices.
How much did rents increase last year?
It was more moderate because the current offer was being absorbed. But currently Prologis in Spain is at 99.2% occupancy with one and a half million square meters managed. Two modules left in Coslada, an area in San Fernando de Henares, almost nothing.
He says they don’t have to grow but I see they need to reach more space to manage…
Yes, to provide customer service. However, there is no investment requirement. If it is not reversed, nothing will happen.
But there are ongoing investments…
In Hospitalet, near Ronda de Dalt, almost in Cornellà. This is what we call Barcelona Gate for last mile management or delivery. We also have another warehouse in Sant Boi. 30,000 meters in San Fernando de Henares and 40,000 meters in Guadalajara. About 92,000 meters in total. Approximately 1,250 euro per square meter, 31 million investment in 21,000 square meters in BCN. Approximately 87 million euros were invested in Madrid.
What are the emerging trends in the logistics sector? Warehouses for vacated Spain?
Yes it is a trend but being in small towns is not our business. However, this general trend towards building logistics infrastructure in areas that was unthinkable a few years ago is taking place. For example, in Seville, Vitoria or Vigo, which have less population but need large distribution centers to drive e-commerce sales in the region.
What are the needs of new logistics platforms?
Electric chargers. Renewable energy. Energy storage. This is what customers demand. And customer experience with friendly facilities, higher productivity and less absenteeism.
Last year was the year of the logistics boom. Will this rate continue in the coming years?
It will not be possible to sustain similar growth. But rents have been stable in recent years. With fixed rents and stable productivity, the market has been disrupted. The existing rents in 2006 have not been reached yet, the upward trend continues. All rents will go up, I’m sure.