With an appetite for pursuing attracting risk-return opportunities, Swiss investor Stoneweg has had an eclectic approach to real estate investing since its launch in 2015. The Geneva-headquartered firm has invested to date in multifamily, hotels, medical clinics and logistics assets, as well as launching a debt arm.
Its adventures have taken the business from Madrid to Missouri, with offices today in Barcelona, Dublin, St. Petersburg Florida, Geneva, Milan and London. Yet recent trends have convinced the firm more than ever to focus on the pillars of living, logistics and hospitality, and seen Stoneweg solidify its logistics and industrial credentials in its home country.
In Switzerland, Stoneweg co-created Varia Swiss Realtech Properties in 2016 alongside Swiss investment manager Decalia. The Swiss business has since grown to include 15 assets with a value of CHF 400 mln. While initial investments including medical clinics alongside industrial properties, the strategy has been honed over the last couple of years to focus on industrial space.
‘Initially, the Varia Swiss Realtech strategy was about building a product that was immune to digitalisation,’ says Jean Golinelli, partner at Stoneweg, and the former CEO of CBRE Switzerland. ‘Six or seven years ago, that was largely a retail-related story with the rise of ecommerce. Part way through our plans, Covid reinforced our thesis but came almost too soon. We were acquiring assets at good conditions at the time, when suddenly, everyone wanted to get into the sector. Nevertheless, we intend to focus on industrial and logistics for the long term.’
Opportunities arise
He adds: ‘We are an opportunistic investor, in the sense that all of our strategies take a bottom-up approach. We look at the needs of users and build our investment theses based on that. On top of our 15 core assets worth CHF 400 mln, we also have some land and buildings where we intend to rebuild, so if we add that, the portfolio value almost doubles. Our strategy is a combination of holding assets long term, value-add opportunities and developments.'
For Golinelli, Switzerland also presents an interesting set of fundamentals. ‘Here, slightly less than half of logistics and industrial stock is over 30 years old. When you build logistics, you don’t usually build it to last 100 years, but there are a lot of dated properties in the country and the materials and overall quality of the builds from 30 years ago are low. We see stock that needs to be either significantly refurbished or rebuilt; a lot of it doesn’t fit with present end-user needs or ESG obligations.’
He adds: ‘Climate change, and regulation around that concerning ESG alignment, have become a really strong accelerator. But the ultimate driver is climate change. I am very surprised, almost every day, by the naivety I see concerning climate risks. If I look just 10 years ahead, I imagine industrial real estate will have changed a lot. We think there will be many more constraints. Therefore, we are trying to build industrial space that meet current needs but will also last a long time. You have to do it right, and do it now.
‘We’re investing a lot in the portfolio – perhaps more than is justified by the immediate returns, as you can’t pass all the costs onto the occupier. But we are convinced that it is the right approach for medium-term returns. We are thinking about materials that are both environmentally positive, and can be reused; we are exploring construction methods that are ahead of the regulations – almost too ahead in that they are not universally recognised. Zero carbon is a strong focus and we see the tenant appetite for buildings with low energy costs, where they spend less on consumption and have greater security around expenses. That also means the rents can be higher.’
Like all real estate developers, Stoneweg has faced construction price inflation in the last 18 months. But Golinelli notes that the firm has had a plan in place for that too. ‘We took a part legal approach – we had watertight, turnkey contracts, so the impact on existing developments was low. Secondly, with our present and future schemes, we are trying to add additional floorspace. If you can extend a floor by 10 or 20%, even if costs are higher, you have more surface to rent in the long term. Lastly, our project management team have been working hard with the industry to find ways to switch out materials or find smart construction solutions.’
Adventures in co-warehousing
Golinelli has an alternative view on the role of landlords – and not a view that all his peers might like. ‘Landlords have controlled supply for far too long – so they have controlled the quality as well,’ he notes. ‘They have been too passive. But I’m convinced that they should be much more active and involved in tenant strategy.’ That means addressing issues around the way the world of work is changing – even in the logistics industry.
‘We see our four pillars as bringing services to our tenants, providing digital solutions, addressing common and collective issues, and tackling environmental aspects. These underpin our latest initiative, Beezi.’
Beezi is a flexible industrial space platform within the Varia Swiss Realtech business, which is not quite a copy of the flex office model, but offers high quality shared amenities and a degree of flexible occupancy. For Gollinelli it has a strong social dimension, tackling the elusive “S” in ESG.
‘Industrial assets are not usually in city centres or even in urban areas, so local amenities are often few and far between,’ he notes. ‘Usually, an occupier will have to allocate some of its space to a kitchen and common space for workers, as well as office resources.’
Beezi is a solution for multi-let industrial spaces, centralising these kinds of amenities, so that when a tenant rents space, they can use the entirety of that for its principal business. ‘We decided to do this in a very high quality, attractive way, with a solution that recalls Google offices,’ he says. ‘Taking a neuroscientific approach, our first centre in Tolochenaz, Switzerland, comprises a lot of green space, a 30 m2 shared kitchen, creative spaces and a conference room for 20-30 people.
There’s a gym based on neuroscience programs and small pods for quiet time. The common spaces also facilitate exchange between the tenants, so they can get to know each other and see where synergies arise. In our office building in Geneva I occasionally pass other occupiers in the elevator but we don’t know anything about each other! Beezi is about adding a social dimension to warehousing that improves the working environment overall and consequently productivity .’
The future of work
‘During Covid, we brought the workplace into our homes, but I believe there is an argument for creating workplaces that people want to be in, to foster collaboration and move away from this state of alienation.
‘Finally, an element of each scheme is given over to short-term lets, for tenants that want to experiment with an idea or add space, which you can rent for three or six months.’
He adds: ‘I think we have to mix up the ecosystem. Diversity is everything. Beezi, for example, is about making sure that F&B spaces aren’t just for white collar management, but for everyone. Gen Z is looking at things differently and we have to align with their perspectives, also to retain employees.’
Finally, Beezi – and Gollinelli’s philosophy – is about making the world of logistics and industrial sustainable for the long run. ‘Can you imagine a world without physical shops or offices? Yes. Can you imagine a world without warehouses? No. This industry is the future and we have to keep moving with the times.’
This also aligns with the occupier trends that Golinelli is witnessing. ‘There was clearly a huge peak for the logistics industry and for warehousing as a whole in 2021, which has since calmed down a bit. But we do see vibrant long term occupier dynamics. Tenants may be taking a bit more time to sign, but they are still under pressure to find premises. Land for development is difficult to find as there is some societal pushback against new sheds. What we see, and what we are targeting too, are end-users that are more and more concerned with ESG, as they become increasingly constrained by regulation.
'That’s why digitalisation is a key element of our strategy. The Beezi platform is entirely digitalised, that’s why it works, from booking spaces down to the provision of food and beverage (F&B). It helps us create a higher quality product, it minimises costs, and we think it will be part of the answer to how industrial space will best serve tenants in the future.’
