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Spain: last-mile logistics is the blend between industry and ecommerce.

Updated: Nov 28, 2020

While Spain n is one of the EU countries for whom mobile connection is the most important and where ecommerce is growing at its fastest, it is also the most affected country by the 1st and 2nd wave of the Covid-19 pandemic. As a result, last-mile logistics could become a vital economic issue for operators and brands, and therefore an extraordinary opportunity to reconvert aging industrial assets.

The last mile Eldorado for the Spanish real estate industry?

Last-mile logistics represents the whole eco-system around the last mile delivery. For merchants (Amazon, Nike, Ikea, Carrefour, ...), this is about being able to deliver their product to the consumer in the city center from a nearby logistics center. For large operators (Segro, Goodman, Geen Oak, Patriza, Prologis, ...), it is thus a question of finding logistics spaces for these merchants and preparing them.

A conurbation like Madrid has more than 4 million inhabitants. But, unlike many European capitals, many old industries and vacant lots are still available at just 15 minutes from the city center. Something which is quite unlikely in Paris or London. Just look at the history on Google Earth Pro of the suburbs of Madrid over the last 20 years to realize this. The capital is growing faster than any European capital. Except maybe that of Poland.

For investors, this is a real opportunity to transform old assets. For owners of aging industrial assets, it is an opportunity to sell their capital and convert it. It is a win-win situation for everyone. The key is to know how to detect assets that can match the needs of ecommerce.

This is what Philippe Chevassus has been doing by creating OPEA Partners, an independent broker who has specialized for 3 years in the search for industrial assets with the aim of reconverting them into last mile logistics. "On the one hand, there is an important industrial fabric quite close to major cities in Spain. This gives access to many opportunities for conversion. On the other hand, the local government of the Madrid region, for example, has just announced a radical change in the granting of industrial or residential licenses. This will allow investors to plan their operations in the short term. This is a particularly important detail as it also means that rural or commercial land will tend to be quickly converted into industrial land. As for industrial assets, they have often been owned for generations by local families who do not know how to sell them, nor have any idea about their possible conversion".

Collier estimates that in September alone, 3 billion euros were invested in Last Mile Logistics portfolios in Europe, which represents a 20% increase, compared to the previous year. Last-mile is clearly a new industry in itself on the Iberian Peninsula.

The requirements of this new logistics: space, modernity, and above all proximity.

The evolution of e-commerce is forcing operators and investors to think bigger evermore. Existing warehouses are mostly smaller than 30,000 sqm, but more and more operators need 50,000 or even 80,000 sqm built for mega warehouses. This often forces them to look for space in the 3rd ring of capitals (30-40 km).

Guadalajara or Valdemoro in the great suburbs of Madrid have seen these mega projects arrive in recent months, which pleases the local authorities, since a mega warehouse can represent 700 new local jobs. In the provinces we will see the birth of mega logistics parks with large plots of land that can help the big ecommerce investors.

As for Madrid’s 1st ring, there are very few spaces left. “There, on gets to find residential lands that have just been converted into industrial lands. These are the last opportunities in Madrid’s first ring. The city is growing, and these spaces will soon be considered as an intramural space in the city with numerous housing and green spaces. Once transformed into last-mile logistics, their land value will multiply because they will allow their occupants to deliver products to consumers in the city center in record time. Thus, invoicing. In Spain, it could well be that the land value of a last-mile warehouse exceeds that of some offices in the same area,” says Philippe Chevassus, who invites you to look at the evolution of the inner suburbs over the past 20 years on Google Earth Pro to see for yourself.

As for the features of new warehouses, manufacturers' specifications are increasingly tending towards responsible standards such as Leed Silver certification. In addition to the need for reworking or co-packing for ecommerce activities. A detail that comes up every now and then in the specifications is the height of the warehouses, the higher it is, the higher its storage capacity.

More and more investors in logistics need height, and therefore authorization for this. Like Goodman, for example, who is betting in Catalonia on "multi-level" projects such as this 20m high warehouse that will house several customers.

Huge parcels of land, but no one to sell them.

Besides, OPEA Partners is increasingly specializing in the sale of entire industrial parks and portfolio.

"The bigger it is, the more it makes sense for logistics and international investors," he explains.

There are many institutional logistics park projects in Spain that had aimed too big: they had built more than 1 million sqm of industrial land, but do not know how to sell them in parts through partitioning. And even less so to international investors. It is at this level where Philippe Chevassus intervenes. He convinces the project promoters to sell the entire portfolio and in many cases the plots need to be reorganized. "Owners are often asked to sacrifice roads to enlarge the plots. The basic plans contemplate plots of 30,000 sqm. This is not enough. Plots of 120,000 sqm are also needed, and often enlarging the roundabouts will make this (plots) worth something, as a portfolio. The space and infrastructure needed for ecommerce is still underestimated".

Existing assets in Spain are often presented a bit old school. Heavy PDFs, pixelated photos, non-updated plans, people who do not have a good command of their files, cadastral plans that do not correspond to reality,... "you cannot sell a factory or any industrial asset, which has been owned for 3 generations and which has created jobs, like you sell an apartment. You first need to sell the sales idea to the owners. Making sure all shareholders agree to sell at the given price. Knowing if you are selling the shares of an owner company or the assets. In any case, never just upload the PDF on the web like most young consultants of the big brokers usually amongst them," he explains.

OPEA’s work consists of unearthing these totally off market assets, be it lands or abandoned factories. “Finally, thanks to our intervention, which is equally what we repeatedly tell the authorities when we negotiate for urbanization licenses, an empty lot can become a hub of 700 jobs; with that, a responsible mayor has no choice but to put your file at the top of the pile”.

The other pillar of development that OPEA offers to its clients is networking with the town halls of the capital's neighboring cities. Town planning managers know which land is going or can become industrial. You just need to have the information and make proposals.

Also, however, OPEA parters counts on a network of 2000 top executives from its business network spread over the territory and who are gatherers of off-market assets.

Towards the logistic-commercial hybrid models?

The logistics and ecommerce needs will not only transform factories or land, but also retail commercial parks.

The logistics real estate market in Spain reached 1.8 billion euros in 2019, an increase of more than 44% compared to the previous year, thus representing 24% of the total investment in the tertiary sector, according to a Knight Frank report. Many local brands need to redefine their local strategy. Boost e-commerce and reduce physical presence.

This means redefining existing parks and transforming some of them into logistics hubs. Though, it means, above all, a radical change in public administration, as licenses still take too long to be granted. For example, the current height of logistics standards does not meet the needs according to Philippe Chevassus. “The authorities need to wake up and grant more flexibility and speed. In logistics, investment means job creation”.

Philippe Chevassus is a real estate broker specialized in the detection and conversion of

industrial assets in Spain. For 15 years, he has been publishing an economic media on real estate and industry in Spain, Le Courrier d'Espagne, and relies, above all, on the business network of 3000 top executives of the networking club he founded 12 years ago in Madrid, WOMMs, to obtain off-market assets even before the major players in the sector.

If you are investor and looking for a portfolio of industrial assets in Spain to convert in Last-mile or PBSA, contact him at:

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