Making predictions in 2022 is risky, but outstanding customer service remains a safe bet for success and growth, according to logistics specialist P3.
Since 2020, the logistics sector has demonstrated how to meet demand and serve customers, even amid intense uncertainty. But how does a developer grow profitably in 2022 when disruption can seem like the new normal?
It’s certainly not simple. This year, appetite for warehouse space is red-hot due to mega trends such as e-commerce. But there’s also an acute scarcity of land in Europe. And the continent is a patchwork quilt of differing regulations and cultures. For example, rules governing urban development vary, country to country.
Logistic developers navigate all this, and more. Simultaneously, leading providers are also innovating, overturning the old stereotype of the warehouse as a big, chilly box. Across Europe, ultra-modern facilities are being developed that contain advanced robotics and have staff wellbeing and sustainability concerns at their core. Up-to-date assets also help investors to hit their environmental, social and governance (ESG) goals.
So how does an ambitious provider grow and develop in 2022’s challenging environment? To find out, who better to ask than one of the top four warehouse developers and owners in Europe.
P3 Logistic Parks builds and leases high-quality warehouses in 11 countries for a diverse group of clients, including institutional-grade firms such as online retail giant, Amazon. This year, the firm is pushing to profitably grow its business, by placing sustainability at the heart of its activity through 2022, and beyond.
P3 has a track record in logistics stretching back two decades, so customers get a breadth and depth of experience of which there’s not an overly abundant supply, right now. The asset class is currently seeing an influx of new developers desperate for returns. Inevitably, the novice players lack some know-how and the granular expertise of a business with deep roots in the segment.
P3’s 2022 development pipeline stands at 800,000 m2. From its home ground in the Czech Republic, the firm is targeting western expansion in Germany, France, Italy and Spain. Projects in Romania, Slovakia and at home, complete a continent-wide spread of development activity.
Additionally, P3 is making its development debut in the key French market, with a 23,000 m2 speculative project. It is also on track to deliver the joint biggest warehouse in its history, in San Salvo, Italy. This asset comprises 190,000 m2 and is for Amazon, a very high-profile company with exacting needs, for whom only the best facilities with the latest technology and facilities for staff, will do. Also among recently completed developments is an 83,000 m2 facility in Poland for Westwing – one of the company’s biggest deals of 2021.
At the sharp end of P3’s profitable growth drive is David Marquina, P3’s Chief Development Officer. For him, growth begins by placing customers at the heart of the business.
‘We’re diversifying and expanding, which is possible thanks to our long track record of helping customers with different needs,’ he says. ‘We always focus on understanding our different customers’ specific requirements. So this is an exciting period for us, with 16 diverse sites under construction.’
These assets range from small delivery stations for e-commerce players, to cross-dock buildings and standard logistic sites for Third Party Logistics (3PL), all the way to multi-level warehouses.
Of course, anyone can be ambitious. But succeeding in a complex region like Europe, at a time like now, requires a specific set of skills and resources. So how does P3 deliver for customers?
Land and local presence
One fundamental is land. Finding truly optimal locations in a place as crowded as Europe, is a challenge. Tightening regulations on where construction is permitted, complicate matters. Therefore, customers benefit when a developer has a land bank it can utilise at any time. And P3’s land bank is among the largest in the sector. The company is currently acquiring more land to support its growth ambitions by meeting customer demand.
‘The simple fact is you need land to deliver your project,’ says Marquina. ‘To achieve our independent growth ambitions, we need to buy more land, so we’re active in that.’
The other ingredient is ‘boots on the ground’; in-depth local knowledge to detect opportunities a less experienced player might easily overlook. This year, P3 is boosting its capacity in this area by recruiting more investment managers and asset managers. There’s a newly appointed investment manager for France, one for Poland, and similar roles are being filled for Germany and Italy.
The ‘boots on the ground’ approach has already shown its value. At P3 Ostrava Central in the Czech Republic, the firm is in the process of transforming a neglected industrial site into an ultra-modern business park, with targets for top BREEAM ‘Excellent’ sustainability ratings, and a focus upon the local community. The site is ideally placed in a location that has become urban as the city of Ostrava has expanded over time. But for years, it was overlooked. P3’s local team won the trust and support of the site’s former owner to revamp it, who agreed to sell based on their vision for it.
Of course, in 2022, ‘green goals’ are also high on the agenda, with carbon-emitting assets unpopular among customers and investors with an eye on their ESG commitments. Tapping into the growing appetite for green warehouses is another plank of P3’s growth program.
This year, the firm is leading the way in repurposing pre-used industrial plots – such as the Ostrava site – known as ‘brownfields’. Doing so preserves the environment and smartly circumvents the land shortage issue. But brownfields are complex and unpredictable projects, due to decades of activity on the sites. To execute one profitably involves a degree of expertise which is in short supply across the industry.
Last year, P3 delivered its biggest brownfield project to date, a 129,000 m2 facility in Kamen, Germany. That brand-new facility was fully let before completion.
With macro conditions so uncertain, sound judgement is another key ingredient of profitable growth. One recent deal in the south-eastern Netherlands near the German border, indicates this quality at P3.
The company acquired a development scheme in an unpromising-looking location last year, not in a logistics cluster. This made the project easy to overlook and risky; would demand exist for this obscure location? Nonetheless, P3 trusted its in-house team’s research and due diligence and took over the construction project, with a forward purchase on a speculative basis.
There was some drama when a potential occupier pulled out of a deal at the last minute, but P3 quickly found another client, who occupied the whole site right after completion. Today, P3 Echt – in the Dutch region of Echt-Susteren – has one of the highest BREEAM sustainability ratings in the country and is home to a single customer on an institutional-quality covenant.
There are more ways for leading developers to grow, beyond doing a great job for customers on the bricks and mortar side. P3’s customers benefit from the company being exceptionally well capitalised and in possession of a coveted BBB credit rating. This means it can offer a range of relevant financial instruments (green bonds), or overdeliver in the form of an ASTI (Above Standard Tenant Improvement), racking systems, electric vehicles, better local amenities, and other features.
At the heart of it all is an outstanding customer experience. Marquina says: ‘Even during this period of disruption and uncertainty, there are lots of opportunities and I think the advantage for our customers is that we’re experts with benchmarks across the countries we operate in.
‘Every day, we’re negotiating with contractors and when an opportunity arises, we can very quickly assess the associated costs, then capitalise on it. Meanwhile, we are always seeking to secure the best prices, which all customers want.
‘Ultimately, we are a long-term investor and developer, which means we become long-term partners with our customers. They tell us we are a trustworthy developer, which is what matters in the long run. This is how we grow.’