Ismail Klement He is the CEO and Vice President of real estate group Merlin Properties. He is currently in Barcelona on the occasion of the International Logistics Fair (SIL) celebrations. Merlin is one of the main real estate companies listed on the Spanish stock exchange. It now focuses on ‘data centers’ and logistics platforms. He sees clouds on the horizon and criticizes the industrial bet for Nissan’s Free Zone land.
How about the Nissan terrain thing?
The real estate logistics hinterland of the port of Barcelona was an excellent opportunity to place projections and capacity for expansion, but for some reason this was undesirable. They don’t even want to see us.
Considering the opening of the competition, haven’t there been more positive changes for logistics?
I don’t know what it is, but I don’t want logistics. After all, we are talking about 70,000 square meters of surfaces, which is 500,000 meters available in one minute.
After all, won’t half the land be for logistics?
It remains to be seen how it will turn out. The Consorci de la Zona Franca (CZFB) has already reached the limit in negotiation and will issue a bidding document that will allow it to secure its income. The negotiators’ latest attempts have been about lowering rents, something CZFB cannot accept. The aim is to pay the canon of the logistics company to the industrial part, so that everything comes for free and gets help from PERTE. It threatens to become a subsidized economy.
Reindustrial…
The term industrialization belongs to the past centuries. Is it more white-collar to tighten screws on a production line than to be in a logistics warehouse with forklifts? Is logistics blue collar?
But CZFB has repeatedly defended the logistics option…
Yes, but not taken into account at the reindustrialization table. Canon is a priority. Vía Cilsa (Merlin’s company participating in the Nissan competition) will do its best. An interesting proposal was made before with a data center infrastructure for the city of Marseille, but we were ignored. And this was a very important hyperscalar project, but it wasn’t possible because of the opposition from the table. There are elements that marginalize our project and we do not know why. It may come out in a few years, but it will be through the Prosecutor’s Office. For whatever reason, there is something that causes them to ignore us.
Everything for the industry…
We are crazy. We can put the industry almost anywhere. It doesn’t make sense to build industrial facilities in Montcada or Baix Penedès, but at the first simultaneous Barcelona in case of lack of land. We do not understand it, and we do not wish to understand anything.
Exciting moments in the logistics industry at SIL…
The situation is delicate. There is a crisis in the medium term. There may already be a supply crisis that does not break the main trend of the market, but whoever gets caught…
medium term?
Maybe three years. But if a project takes five years to develop, there will be those who catch the occasional crisis. oversupply crisis
Isn’t it a little early to talk about oversupply in full logistical enthusiasm?
Looks like soon. And everybody in the industry gets angry when I say that. However, the first conditions are met for this to happen. More and more insurance companies and people who have not done logistics in their lives are investing. If there is a contraction in demand at some point, it will affect them more than anyone else. An example is the US, Amazon slowing down its logistics expansion is a clear sign that the penetration of the ‘online’ channel has limits. In the US, it went from 30% or 35% annual growth to ‘growth’ below 20%. Logistics expansion stood dead. Amazon started to represent 26% of the logistics market in the US.
Are there any pauses in projects?
Everywhere. All companies have paralyzed projects due to rising construction costs. Everything in the house stopped. It is no longer possible to transfer the increase in costs to housing prices.
Is it a serious crisis?
Oversupply crises are quite common in the real estate industry. It’s about reacting calmly, reducing developments and softening prices.
How do you see the rate increase?
Who lends to Spain for 10 years at what interest? Uncertainty must come at a cost. But there will be debt between 3% and 3.5%. And mortgages will not fall below 5%.
Dramatic.
No need to get depressed. The situation will not be like it was in 2008. At that time, the leverage level of the listed real estate sector in Spain was 77%. Now, the average level is 40%. We have 440 million income from rents and 75 million from debt. We can be calm.