I was recently invited to speak at the CBRE European Power of Three conference, to share what I believe are some of the more important issues affecting our industry.
The theme was ‘seizing the opportunity’. The atmosphere in the room seemed euphoric; market conditions were much improved for the developer and investor communities, and all those who advised them. Rents were on the increase and lease incentives disappearing, all complemented by substantial yield compression.
In such a positive environment, I posed the question: so where will all the money go?
I was beginning to wonder who was seizing what opportunity, and indeed whether the first customer approach would be buried in an avalanche of improved market sentiment.
Were the big, influential movers and shakers really willing to adopt a customer-centric approach towards the occupier, or even understand what this meant in reality? Quite honestly, I had my doubts, as did my fellow occupiers in the room, including Amazon’s director of real estate EMEA, Raimund Paetzmann.
I reminded the audience that the future for all who earned their living from real estate — whether investor, developer or advisor — lay in tracking the changing business habits of their customers. The real estate industry should never forget that what underpins any asset class is payment of rent.
In order to be successful in tomorrow’s world, businesses need to monitor trends and seize opportunities today.
The real estate industry is no exception, and at Deutsche Post DHL (DPDHL) we have a plan. DPDHL recently announced its new Strategy 2020: Focus, Connect, Grow as a continuation of the positive momentum generated by the successful Strategy 2015, which defined the group’s next phase of development.
Strategy 2020 outlines the group’s strategic priorities for the coming years and underscores its goal to become the company that defines the logistics industry. Among its focus areas are the further expansion of logistics services in the world’s emerging markets and the international expansion of the company’s parcel business in order to take advantage of the global e-commerce boom.
Consistent with Strategy 2015, the emphasis will remain on organic growth. There is compelling evidence supporting DPDHL’s Strategy 2020 objective of growth in emerging markets. The estimated compound annual growth rate in GDP from 2011-20 is 2% per year in mature markets, compared with 5.4% in emerging markets. We therefore plan to invest in fast-growth markets ahead of demand and have publicly stated our ambition to increase our footprint in emerging markets from 22% in 2013 to 30% by 2020.
The estimated growth in domestic revenue from parcel deliveries, fuelled by e-commerce acceleration, is substantial. Global compound annual growth rate for 2011-20 is estimated at 8%, with emerging markets at 11% and mainland China at 15% for the same period. Acceleration of e-commerce is regarded as both an opportunity and a threat. Logistics operators are venturing into e-commerce to support logistics, while at the same time e-commerce operators are venturing into logistics to support e-commerce.
Having shared with the audience where we will focus in the future, I was asked to identify the one area where the property industry should concentrate its efforts. My answer was simple: start with the customer, understand their needs and work backwards. A competitive package is only the start. Provide your customers with the buildings they want, in the locations they choose and when needed, while delivering a great customer experience.
Imagine a world where real estate providers were as customer-centric as Amazon. These sentiments were roundly supported by the other occupiers in the room.
On a positive note, I left the conference with a genuine feeling that the industry is listening. There seemed a real willingness to become customer-centric. We, as occupiers, accept our responsibility to communicate to the market the dynamics that will shape our future business. It is now for developers, investors and those who advise, to respond with great customer service.
Oh, and back to my original question: so where will all the money go?
Paul Graham is senior vice-president, corporate real estate, for EMEA at Deutsche Post DHL