The evolution of last mile properties will require a unique approach to funding, says Arvi Luoma, co-founder & CEO of Blackbrook.
If the events of the past 18 months have shown us anything, it is that the world can adapt and evolve quickly to survive and embark on the road to recovery.
While the pandemic tragically continues to be fought in many parts of the world, we’re starting to see vaccination programmes gain momentum and economies begin to open up again. The ingenuity and adaptation that have been behind this has been staggering.
Evolution has been evident where sectors quickly adapted to serve the needs and purposes that the situation presented us with. A clear example of this has been in logistics.
The definition of what constitutes a ‘logistics asset’ has changed dramatically over the past 12-18 months, shaped by the surge in interest in e-commerce and ensuring effective movement of goods during a pandemic.
I wrote on this topic several months ago, on how logistics is becoming more entrenched within grocery retail. I had noticed that in my hometown in Finland, a local retailer had been opening a significant amount of convenience stores.
What was interesting was how these sites were being used. Not just as standard convenience stores serving a local client base but also as micro-distribution hubs, allowing them to serve customers through home deliveries of products ordered online.
A prime example of evolution in action: a retail site being upgraded to serve changing consumer demands. Similarly, in the US, Amazon has recently begun to repurpose defunct shopping malls – proving that location is key, and technology can be adapted to fit into any space.
In the last-mile logistics space we are seeing assets with multiple floors, structural parking, unusual dock ratios and/or a focus on side-loading. Logistics sites increasingly need to be attractive places for workers, including green space and leisure facilities. Logistics continues to evolve, and this makes it a hugely exciting space to us as an investor.
Bridging the funding gap in logistics
One challenge is that since logistics is evolving, this can make it problematic for lenders who struggle to define it. Valuers equally are unclear on market perception and demand amongst occupiers and investors. It is no longer relevant to look back past 12 months, the world has moved on.
Despite the positive growth story on e-commerce in Europe, there are a lot of countries where e-commerce penetration remains low, the potential for growth is high, and onshoring of warehousing is accelerating. Within those countries, there are many regional cities that have large urban populations, but limited market velocity.
These dynamics create significant challenges for businesses looking to break ground on new projects which capitalise on the broader trends - the funding options aren’t there yet as the market is untested, and many investors are hesitant to take the first step.
A specialist, pan-European investor
This is where engaging with a specialist investor that understands the evolution of logistics, has a pan-European perspective, and a proven track record of build-to-suit development financing, makes a difference.
We understand the challenges developers and tenants face when building industrial sites as they seek to get ahead of the logistics wave that is sweeping across Europe.
Since we launched in March 2020, Blackbrook has deployed over €300 mln across 30 properties in five European countries. This includes last mile urban logistics sites and other strategic logistics facilities.
We specialise in build-to-suit development financing, sale-leaseback transactions for business-critical assets, and the acquisition of net leased industrial real estate.
With over €1 bn of capital to deploy, Blackbrook combines the security of 100% development financing, with the benefit of a long-term tenant-friendly end-investor. An optimal solution for all parties involved, allowing your valuable resources to be allocated for other business growth initiatives.