The Netherlands remains one of the most attractive logistics markets in Europe, despite high land prices and labour shortages.
Léon Vié of P3 Logistic Parks predicted at Mipim 2023 that his company would add €3 bn of investment value to its European portfolio over the next 10 years.
Vié, who heads P3’s operations in the Benelux (the Netherlands, Belgium, Luxembourg), made the statement during a roof top panel discussion about the business climate in the Netherlands, held on the Boulevard de la Croisette.
P3 currently has €8.2 bn of real estate with a presence in 11 countries across Europe covering about 7.6 mln m2 occupied by 475 clients. The occupancy rate stands at 98%, which according to P3 probably equates to ‘a record low’ vacancy rate.
In 2022, P3 set a new company record of almost 594,000 m2 of completed development projects.
The company also has 355,000 m2 under construction across Europe, 2.5 million m2 under development and it is not shying away from speculative development. Despite the tough economic backdrop, demand remains high, Vié said. ‘The biggest problem now is we need 3 million m2 and only half of that is in the pipeline, so rents are bound to rise.’
Occupiers under pressure
Vié sympathises with the customer. By contract they have to deal with rent indexation and high energy costs. ‘This is a heavy year for clients and users’ higher rents put pressure on financial results,’ he noted.
P3 rents out nine logistics properties in the Benelux and it recently acquired a tenth: P3 Amstelveen, a 27,000 m2 distribution centre near Amsterdam. Last August, it acquired a 42,800 m2 distribution centre in the town of Assen in the Netherlands.
Logistics has always been everywhere in the Netherlands, according to Vié. ‘The Netherlands is one of the best situated countries in Europe for logistics,’ he said. Rotterdam has a world class port with excellent connections by road, rail and water, and the Dutch business environment is ‘very professional and transparent’, he added.
This praise does not mean there are no issues - especially at a time of qualified labour shortages for logistics centres. As a consequence, there are developments in places ‘where five years ago no one would have thought of going’, as Vié put it. At the same time, the traditional Dutch hubs of Schiphol Airport, Rotterdam port and Venlo are still very important.
P3 is also encountering relatively high land prices, Vié said. ‘Last year some cities were saying they had to follow the market,’ he explained. ‘Now that prices should actually come down, they tell us, “we will consult with the city council first”.’
With interest rates changing rapidly as a result of central banks’ fight against inflation there is ‘an area of tension between buyer and seller’ when trying to determine the price of a deal, Vié observed. The Dutchman believes interest rates in Europe will be reasonably stable for the rest of the year with perhaps ‘a quarter point added’. Said Vié: ‘For things to move forward, expectations in all areas have to be sort of the same.’
ESG challenges
P3 remains committed to ESG, improving sustainability and lowering carbon emissions.
However, in the current competitive environment companies are looking at their expenses.
Vié said. ‘There is still a lot to gain in the ESG area. We still have a list of measures we can implement to make things run more efficiently, using less energy.’ At the same time, all expenditure is scrutinised and an expense may need extra approval. This leads to internal debate about what should be done, and what can wait. As examples Vié mentions the use of batteries to save energy, going off-grid and relying on a local network, improving dock doors by insulating them and wrapping roofs or walls in grass.
‘It is a matter of getting a return on your investment,’ he explained. ‘We want to strike the right balance. If I develop a state-of-the-art building that saves energy for the user, I should be asking for more rent.’ All P3’s customers are working on implementing ESG and making improvements. ‘Sometimes they are even ahead of us,’ he said. In general, Vié is of the opinion that as far as ESG in real estate is concerned, logistics is leading the way. ‘The question is, should we even go faster?’
