The logistics real estate market is increasingly a global business, following the footprint of its major customers.
Today, we see the rise of logistics clusters - markets with a notable concentration of modern logistics facilities. This trend has become more noticeable over the past two decades.
European logistics clusters continue to benefit from the structural reconfiguration of the continental supply chain. Southern Netherlands and the UK’s Midlands are among the biggest clusters in Europe, with Paris the largest. Many customers in these markets still use obsolete facilities built before 2003, or Class-B facilities built between 2003 and 2008, which, depending on their age, offer less clear height space and fewer loading doors than their modern Class-A counterparts. Customers are continually evaluating and upgrading their real estate footprints.
With globalisation, supply chain reconfiguration and facility modernisation, nowhere is the partnership between landlord and tenant more beneficial - especially to the tenant - than in the global logistics real estate sector.
We work hard to leverage our experience to best support our customers’ supply chain strategies. Many of our 25 largest customers operate globally. As such, their distribution needs span regions, countries and continents, and they occupy more than 103m sq ft across our portfolio.
Our dedicated Global Customer Solutions team excels at streamlining leasing and development processes for customers with recurring real estate needs in multiple markets, enabling them to access global resources from a single point of contact. Moreover, we have created a Customer Advisory Board (CAB) wherein representatives from Prologis and customers meet to learn about each other’s businesses.
The CAB meetings tell us that key issues for customers include flexible space, lease lengths, lease terms, expansion and contraction. We embrace this flexibility through a joint approach that works to anticipate customer needs.
Sustainability remains high on the list of customer requirements. Many customers strive to be sustainability leaders, and they choose supply chain partners with the expertise to help them reduce their environmental impacts. As such, they seek sustainable buildings for efficient operations. We are working to ensure our approach brings sustainability into ever-sharper focus.
This is top of mind when selecting construction materials, choosing heating and cooling methods and installing lighting. In broader terms, we work with customers to raise awareness of energy conservation methods.
Robotics and technology are having an impact, too. Customers recognise the need to increase the pace at which they adapt to new technologies. Unmanned aerial vehicles, or drones, could revolutionise the delivery process, and DHL is testing a ‘parcelcopter’. If drones take off (excuse the pun), it could lead to demand from customers for small buildings in or near cities to use as drone points. It is likely that, in the future, logistics facilities will be built in cities to meet demand for rapid delivery. In Japan, many of our facilities are in city centres. These facilities tend to be multi-storey. In Europe, city facilities could be part of a mixed-use development with residential and retail elements.
Property management and engagement are also important. Customers ask for regular meetings, agreed-upon resolution times, a 24/7 hotline, dedicated contact points, a personalised approach, further value-add services, structured feedback, excellent communication and attention paid to the ‘humanising’ elements of buildings. Our logistics customers are starting to ask for everything from relaxation zones to volleyball areas and gardens.
With logistics and supply chain infrastructure evolving at a rapid rate, so too are customers’ real estate needs and facility requirements. Now, more than ever, partnership founded on trust, collaboration and knowledge sharing is essential for mutual long-term success.
Philip Dunne is president of Prologis Europe