Spain: Last-Mile Logistics Just Get Started
Updated: Oct 4, 2020
It's about the logistics of the last kilometer. With health problems, e-commerce is growing and logistics chain operators increasingly need a space near the urban center for e-commerce. Philippe Chevassus has been at OPEA Partners for more than 3 years actively seeking industrial assets convertible into last-mile logistics and selling them to international funds. (Translation form Intereconomia article)
September 22, 2020
What does Last-mile logistics represent? How have these pandemic months evolved?
Last-mile logistics is growing at the same rate as ecommerce. Unlike that the online space for ecommerce has no limit, and the physical space for the merchandise that is delivered does. There is the problem.
During the 1st wave, many warehouses have fallen short on home delivery because they have never given importance to the Last-Mile and its dedicated delivery spaces. And they have been totally overwhelmed in April.
Last-mile logistics is the ability for many brands to deliver their products to their customers, that is, it is increasingly key in times of pandemics. Even without a pandemic.
The urban population has grown 36% in the last 10 years. The urban center will be less accessible every month and the consumer wants to be delivered where they are to save time and travel expenses by shopping.
The trade marks have understood this for several years. And they are looking for spaces near large urban centers for merchandise and its delivery. As there are almost no more logistics warehouses available, we detect warehouses, factory, land or any asset that can be converted for this activity. We focus on industrial assets like industrial land more than 30.000 m2 or old ships to convert.
What kind of space are they asking for?
Logically they ask us for large space. Generally between 20,000 m2 and 150,000 m2 for a plot of land and 10,000 m2 built for a warehouse or building. Now, for example, we have in our portfolio a portfolio of 60,000 m2 of industrial buildings to sell in the south of Madrid.And another 1,5 millons m2 of industrial land in Galice.
There are 2 types of investors. Those looking for a logistics warehouse with a reliable tenant and a medium-long-term contract - we currently have a strong request in Zaragoza for this type of product. On the other hand, funds that seek tenant-free land or industrial warehouses to convert. It can be old ships that do not have logistics activities yet. Or old factories. The important thing is that it has large space, access for trucks and proximity to less than 30 mm from the city center. And that it is offmarket or that we have exclusivity. If not, the product is burned.
How will you find them?
We have cultivated a networking network for 10 years called WOMMs with more than 1000 top executives spread throughout Spain, this allows us to obtain off-market assets. From there word of mouth does its job. The rest is our recipe at OPEA. IO
Don't you think that the available spaces can reach saturation quickly?
Yes, it can be, but apparently, the authorities are less arrogant and agree to facilitate the conversion of licenses. And more with the crisis that is coming. We have seen many logistics procurement operations in Spain this year. logistics is also what gives the most profitability within the real estate. We are talking about 6-8% per year. It is the one that will also create the most jobs in these years. More than 520 million in logistics warehouses were invested in the 1st quarter.
Many large funds are creating a spin off dedicated to the Last-mile. We are talking about spin off with investment capacities of more than 800 million for last-mile logistics in Europe. Up to 3,000 million for some funds. Large operations are taking place these months.
We are also proposing more atypical assets in the city center such as this 10,000 m2 building in the center of Valencia or this industrial land. Last-mile operators are able to use a building vertically as they have done for automated parking lots. In Holland for example, more and more vertical last-mile logistics centers are seen. It is interesting because it requires little floor area and allows you to get closer to the center.
For example, a good initiative has been that of the Madrid City Council to transform the Atocha outdoor car park into last-mile logistics. Another anecdote, recently, we have proposed to a soccer team to sell their land to a farm to set up a logistics center. In addition, with the sale, they make other fields further out in the outskirts at lower cost and with less pollution. A football field is perfect: it is flat, urbanized, and very accessible.
The future trends of the Last-mile?
In what is the Real Estate part, we will have surprises. At the same time as physical retail, I mean stores, they are going down, small logistics centers will be going up. Little by little, the Logistics Last-mile will enter the store or department store downtown. Its value will increase because this activity directly conditions the billing capacity. This means that the Last-mile m2 will surely exceed those of the offices in the near future in some parts of the city.
A real estate asset is worth its ability to generate money, and this is also the case for last-mile logistics.
Original article from Spanish media group Intereconomia published in september 2020.
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