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Brownfield developments: the greatest financial or the greatest social return?

Sander van Tuijl • 24/06/2021
How much space do we want to give which sector and in which places? And what should weigh most heavily in this?

In recent years, the logistics sector has shown an unstoppable advance of XXL distribution centers in combination with city distribution locations to optimally organize the logistics chain. And so to be able to meet the enormous acceleration of e-commerce. Distribution and delivery must be handled increasingly faster, more efficiently and also sustainably because consumers prefer to have their order on the doorstep today than tomorrow. So: more and more large, sustainably developed mega-distribution centers in the landscape along highways with smaller 'brothers' slightly closer to the city.

But how sustainable – economically and socially – is this choice? In order to handle delivery on the last kilometer as efficiently as possible, a location on the outskirts of the city is indispensable to optimally facilitate city distribution. This makes the edges of the city the most obvious and therefore the best places to bundle demand and centrally manage distribution?

Vicious circle

The practice, however, is unruly. In theory, the best places for city distribution centers are the often older industrial estates close to city centers, just within the city limits. However, these are now the places where mainly industrial manufacturing and production companies are located, which are increasingly literally reaching their limits when they want to expand. At that time, a complicated process begins, involving the municipality, among others, to see whether a larger location can be found in the area. If not, they will stay put or they will be forced to move to a completely different region.

And if a relocation by a production company is successful, the vacant space is immediately taken up by decisive and financially strong developers who will realize a regular distribution center that is as large as possible – 10,000 to 15,000 m2. More trumps better in this case. In other words: yield maximization takes precedence over a sustainable future of the vacant space where there is great demand for facilitating delivery on the last kilometer.

Large-scale redevelopments

In the case of large-scale redevelopment of industrial estates, the outcome is usually little different. While a redevelopment is a unique opportunity to make a site suitable for local, small-scale distribution functions, this function often loses the battle for space in our country. This is either due to the divided ownership situations that require municipalities to align all investors, owners and users. Or because a municipality can gain more honor – and more profit – from a change of zoning of the area to housing. After all, the housing market is one of the major players in the battle for space. A vicious circle that is difficult to break in which yield maximization and economic return are the winner of sustainable social return.

Who pays the bill?

If a municipality already attaches importance to an efficient distribution chain within the city, it often designates an expansion location in meadows outside the city. Places that are highly sought after for regular distribution activities, and which are therefore soon after they are released, are taken over by wealthy logistics investors and developers who develop a (too) large DC. Despite the fact that, based on the city's supply, these are often not the most obvious places. It is a choice based on scarcity in a country that is fighting for space, while it can be good places for industrial manufacturing and production companies that do not necessarily have to be located in and around the built environment. Places that offer the industry potential to realize growth while at the same time making room in a responsible way for other, relevant activities in the city such as last-mile delivery. A stroke that is all too often missed because before an industrial owner-user has arranged a move, the trucks from the new distribution center in the meadow are already driving back and forth to the city.

Delay decision making

Complexity and high costs of relocations slow down decision-making by industrial manufacturing and production companies. And if that can be overcome, the desirable locations close to the city will be sold for ever higher land prices. Such a plot is optimized down to the last detail with high building percentages and an optimal ratio of rent and investment return. In short: to a place for a regular DC while these are precisely not suitable for city distribution. This in fact requires a lower building density with parking space for vans and cars, less clear height and, above all, many docks for smaller means of transport such as vans. So choices for the greatest financial instead of the greatest social return. The question arises to whom the bill can be submitted for this. Because today's choices are untenable in the future with the ever-changing logistics infrastructure.

What is heaviest must weigh heaviest

Good interaction between industry, the logistics sector and municipalities is of decisive importance in making new choices aimed at a sustainable future for the Netherlands. There is a good basis for this. The logistics real estate sector is at the forefront of sustainability – solar panels, electric vehicles, LED lighting, energy reduction and green areas – and is happy to meet municipalities in all requirements and wishes for new construction. But a sustainable future requires an extra mile: thinking in terms of social benefits.

New interplay

This requires a new interaction between logistics investors and developers, local industry and municipalities. An interplay in which the logistics real estate sector has the unique opportunity to take the lead in putting the (social) need for sustainable city logistics on the agenda. It is precisely they who can arrange cooperation without immediately laying claims on brownfields to be developed. Municipalities can facilitate this by not taking the current zoning plan but the future of the Netherlands and that of their city and region as a starting point. It requires the local manufacturing industry to take social responsibility while they can count on patience. They must be given the time to consider and initiate a complex relocation. By making social sustainability an integral part of every consideration by every stakeholder in the process, we ensure that what is heaviest may also weigh the heaviest.


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