LOGISTICS WATCH People and partners

Logistics Watch (LW): Many of your peers in European logistics put deal making on hold over the last 9-12 months, but you seem to have continued to find opportunities. what's your secret?
Andrew Creighton (AC): There are two things that give us a competitive advantage, our in-house experts in research, ESG and other technical areas, combined with our local teams covering every country in western and eastern Europe and the Nordics.
Our research team equips us with the metrics, particularly in terms of rental growth and the strength of the occupational markets. This insight provides not only the macroeconomic backdrop for each country where we have feet on the ground, but also the confidence in underwriting transactions.
We have conviction in the sector and we have a clear strategy of what and where we want to buy and how we intend to maintain sustainable assets over the long term.
Our teams have a strong track record of managing assets in a broad array of co-investment mandates and management agreements, which ensures they are well placed to adapt to the evolving marketplace and occupier needs.
Our in-country teams manage the deal sourcing and are vital in helping us to understand where rental values are, where supply and demand is, and, therefore, where we can push rental growth.

LW: Is your recent Bain Capital co-investment in Italy typical? Might you expect to pursue other deals in this form?
AC: Yes, we like to co-invest when our research agrees with the investment strategy. This is one of the benefits of having Cromwell as the operating partner, because we want to co-invest in these vehicles, ensuring we are aligned with our investors. The co-investment is material for us, usually between 5% and 10%. It reflects conviction in what we are doing and is appreciated by clients.

LW: Which territories feel right in Europe for your logistics strategy?
AC: We see many opportunities across Europe, adopting strategies that are tailored to each local market. We absolutely don’t believe in one size fits all. Where and how we invest very much depends on our partner. For example, in the Nordics, where we have a strong partnership with Carlyle, our local teams are helping it to find investment opportunities that fit its strategy for Denmark and Sweden. In Italy, however, we have taken a different approach with Bain Capital, for whom we are identifying, developing and managing speculative logistics developments.

LW.: Apart from big boxes, do you have an appetite for more granular asset types within logistics?
AC: We invest across the spectrum of the industrial sector depending on the requirements of our partners. As well as big and mid box investments, where there may be some short-term mispricing opportunities, we are not afraid to get our hands dirty in the light industrial space. This sub-sector is exposed to different drivers compared to logistics, and it's currently at a more competitive price point. We understand the asset class and are well placed to identify and drive value because of our expertise and local market presence.

LW: How are you finding the ESG challenges of the sector?
AC: We recognise the ESG challenges the sector faces and that helping the industry overcome these creates a huge opportunity for us to make a tangible difference. ESG is absolutely core to everything that we do. Our group head of ESG has a seat on our investment committee, which I think is very rare in the industry.
With logistics, it's too easy to default to focus on photovoltaic panels, which are important but not the only aspect to take into consideration. ESG is far greater than just energy efficiency. While reducing emissions is crucial, this cannot be at the expense of biodiversity, social value or natural capital. These topics are all interlinked, and we can’t be successful if focusing on each in isolation. That doesn’t mean we will focus on each topic in equal measure for each asset, as we know that some will be more relevant and have greater impact for certain asset classes.
We are always looking to implement circular and sustainable practices, in addition to constantly seeking opportunities to reduce emissions at scale and at source.
Because of the negative impacts of greenfield development, we are seeking and favouring brownfield development sites. This aligns with the trend we are observing across Western Europe, where there is a decreasing availability and eagerness for greenfield development. By rejuvenating brownfield sites, we are reducing our natural capital and greenhouse gas emissions impact, while favouring innovative and modern methods of construction and enhancing densification.

LW: What occupier trends are you seeing?
AC: There is definitely strong occupier demand and that's been evidenced in rental growth last year and which is continuing to come through. We are starting to see more occupiers polarising towards the upper tier of the market, just as we've seen in the office market. They have become more focused on the quality of the asset in terms of sustainability and design, which allows them to automate processes, as well as secure power and access to renewables. Availability of labour is still one of the first things occupiers look at.

LW: You have a uniquely global perspective as a Asia-Pacific headquartered organisation. How would you compare the world of logistics real estate and its supply challenges in Europe with certain Asian markets?
AC: It is clear that in Asia there's much more densification of logistics, and you are starting to see multi-story logistics as they become financially viable. This is still very much the exception in Europe due to the availability of land, associated rental levels and construction costs. Having said that, this is the type of development we are considering in the urban logistics environment in France and some UK cities. The supply chain dynamics continue to change, so we can expect to see this evolve.