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Dubbele kloof zorgt voor extra druk op logistiek vastgoed Dubbele kloof zorgt voor extra druk op logistiek vastgoed

Double gap puts additional pressure on logistics real estate

Bauwe Wouters • 25/07/2023

The introduction of zero-emission zones will only increase pressure on logistics Netherlands. This calls for more cooperation to bundle flows of goods into cities. Consultants Industrial & Logistics Bauwe Wouters and Femke van Amelsvoort of international real estate consultant Cushman & Wakefield see that due to the gap between policy makers and users, but also between users themselves, concrete change will be a long time coming.

Big challenge

With the exponential growth of e-commerce, we are ordering more than ever. In this, city hubs - logistics properties at the city fringes - are essential for last-mile delivery of products. But the last mile to the city has become a challenge for many companies: the supply of city hubs is very limited and the city hubs that become available are characterized by high rental and sales prices due to this limited supply and rising construction costs. 

In addition, the land on which these - often single-story - urban distribution centers stand has in many cases a building percentage of only 30%, while it appears that 60-70% would also be feasible if space is used more efficiently.  So too much space is being lost to buildings that are too small. Add to this the introduction of zero-emission zones (ZE zones) in 2025 in the 40 largest cities in the Netherlands that will bar vans and trucks running on gasoline, diesel or gas from entering the city - creating an even greater demand for hubs on the edges of the city - and it becomes clear that logistics real estate is on the cusp of a major challenge.

Yet an April 2023 ABN AMRO report shows that still 40 percent of business owners surveyed do not plan to switch to electric vehicles before 2030. Carriers see high purchase costs and limited range as the biggest obstacles. On top of this, companies are already running into waiting lists for a new or larger (more capacity) electricity connection, but are also reluctant to reduce their electricity use at peak times.

Double mismatch

In the role of real estate consultant dealing with different parties with divergent interests in the field of logistics real estate, practice shows that there is little interaction between municipality and companies and that sec informing about the upcoming legislation, proves to be not enough. Besides the fact that users are not busy preparing to enter emission-free routes in the city, practice shows that municipalities and provinces give priority to granting permits for housing. The question is whether subsequent thought has been given to supplying these residential areas with associated facilities. Finally, it appears that permits for mixing functions in urban hubs are difficult to set up. 

And so there seems to be a mismatch between the proclaimed policies of municipalities and provinces on the one hand and the behavior of users on the other who still prefer the use of single user city hubs. But also between these users themselves. Preferring their own building and one market segment, such as retail, hospitality, construction and facility products creates distance between users and complicates a solution.

Job sharing is the future

However, new legislation and the current debate about the lack of space in the Netherlands are forcing the real estate world to join forces. Eventually, the big market players will have to start embracing the ideal future image of white label: neutral hubs where multiple companies from different sectors are located and logistics is provided by a third, independent party. Logistics flows into the city will thus be consolidated, resulting in a decrease in congestion and an increase in efficiency regarding the last meters into the city.

But previous attempts show that there is still resistance among shippers and logistics providers to combining freight, because it involves extra work and the fear that competitors will get a peek. The fact that many companies don't want to let go of their iconic mode of transportation - a form of marketing that contributes to the experience of an online purchase - also because of the low trust in an external middleman as a carrier of products that companies are currently responsible for themselves, will be an additional challenge to achieve this behavioral change.

Until then, clustering companies in one building (multi users) or multi-level buildings (multi layers) is the only interim solution. Here, the required number of square meters of real estate remains the same, but the use of the space is different: the space is used more intensively by multiple parties or through smarter technologies, such as simultaneously charging electric vehicles on a shared parking deck. Discussions on what the ideal multi-user building should look like are already underway in collaboration with various users.  

Consumers suffer 

As long as companies take - and get - the space to each use their own city hub, change is long overdue and the situation will eventually become untenable. Rents for urban distribution centers will become even higher due to increasing construction costs and scarcity of land, and these rising costs will most likely be passed on to consumers. An example of this is that some parties are already charging - token - fees when returning products, also to achieve behavioral change among consumers.  

The lack of behavioral change among the companies themselves, and cooperation among companies, will also ensure that smaller, emerging parties will eventually fall by the wayside in logistics. Real estate on the city fringes will become too expensive for them, making delivery too great a cost. In the extreme, the logistics system will become bogged down, preventing certain items from being delivered to consumers at all.

Doing more together with less space

It is clear that a different method is needed than the classic way in which urban logistics has developed in recent years. The challenge is similar to that of the current climate problem: how do you make something urgent that lies in the future and whose negative consequences are not yet felt now? 

Municipalities, provinces and companies should seek each other out even more in the conversation about possible solutions and their practical implementation. Users would benefit in the long run from letting go of thinking from a single concept (land, building, transportation). For their part, municipalities should ensure that function sharing becomes easy if users decide to work together. Project developers and investors also have a crucial role to play here, as they will have to work even more intensively with users in order to create profitable projects. We would like to highlight these two groups at another time.

The role of real estate consultant as an intermediary is clear: fulfilling the space needs of users, looking from developers on how to develop a relevant and profitable building, and through close contact with the municipality which is aware of the latest developments of laws and regulations which affects the logistics real estate market. By reducing the distance between the above parties, we can ultimately do more together with less space. 

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