What do you believe are the key challenges in the logistics market across Europe today?
One challenge is sourcing viable, reasonably priced land for urban logistics developments. Sites can be unsuitable due to shape, size, topography, or environmental reasons. Some liquidity is inhibited by sellers not agreeing to changing market conditions. We are also confronted with rising construction costs driven by higher energy prices and cost of raw materials. These issues are worsened further by climbing base rates, decrease in capital values, and a more cautious investment climate. Urban logistics development can also be inhibited by a slow and bureaucratic planning process and municipalities who frequently favour residential schemes or look to protect green areas.
What is driving your decisions for expanding into new locations?
In the UK, Chancerygate pioneered schemes for small and medium sized, last-mile logistic, self-storage and trade counter occupiers, through the development of urban logistics schemes on sites between one and six hectares with units ranging from 350 to 3,000m². In European markets, schemes are often not constructed, rented, or managed at a level acceptable to investors or banks, with units poorly designed, aged and with poor leases. Our schemes will deliver a high quality, flexible product that is attractive to lending banks and purchasing investors. We firmly believe that there is strong occupier demand and rental growth potential.
How do you see the current economic and political situation shaping the European logistics market?
We see a general trend across Europe where planning policies are increasingly driven by a European and country-level environmental agenda. This is placing a greater emphasis on developing industrial brownfield sites as opposed to former greenfield land, whilst many municipalities prefer development that addresses local housing needs. The slow processing of planning applications is a common theme. The Russian invasion of Ukraine continues to drive up the cost of materials, increase energy costs and erode economic confidence. This means Europe is looking to be more self-reliant, leading to more nearshoring and onshoring that will increase demand for urban logistics space.
What role does sustainability play in your investment approach?
Sustainability is a core feature of our product and a key differentiator against many existing European urban logistics schemes which lack green credentials. In our schemes, we utilise sustainable solutions to comply with BREEAM Very Good or better certification as standard. It is our plan to take this to the European market. We are continually reviewing our specification, listening to tenants, and working with banks and investors to ensure we lead the market. It’s part of our mission to be a forward thinker and set an example in driving ESG policies into our schemes and across our business practices.