Interview with Robert Dobrzycki in PERE - Logistics’ trans-Europe express gathers speed

Panattoni CEO Europe, Robert Dobrzycki, spoke about the pan-European industrial and logistics market in the latest issue of PERE magazine. What trends are fuelling greater geographic diversification across European logistics markets? Read the full article below!

 

E-commerce and supply chain transformation, coupled with investor demand, are creating a truly pan-European industrial and logistics market, says Panattoni CEO & co-owner Europe, Robert Dobrzycki

While European logistics real estate markets have garnered avid investor interest in recent years, much developer and investor activity has been focused in a few prime markets. But occupier trends that have intensified during the pandemic – notably, the need to provide e-commerce delivery centres close to populations and onshoring bringing increased production activity back to parts of Europe – are now creating conditions in which it is both necessary and desirable to create truly pan-European development platforms that are able to fulfil investors’ desire to build large, diversified portfolios across the continent.

What investor-level trends are fuelling greater geographic diversification across European logistics markets?

There is a huge shift of capital from other asset classes to logistics because of the well-established structural trends that favour the sector. However, compared to the amount of capital allocated, the total stock and value of industrial property is still small relative to other real estate sectors. There is much more demand from investors than there is product available, therefore yields are continuing to compress across European markets. The historically high capital values we see today are nevertheless still justifiable, because it is becoming ever more difficult for developers to buy land, get a permit to build and supply new logistics facilities in desirable locations. Frequently, logistics is not perceived as a desirable use for municipal authorities in high-consumption areas, and populations in those areas do not want warehouses as neighbours. Scarcity supports values for logistics property, while also offering investors the likelihood of further yield compression in the long run because of excellent prospects for rental growth. Meanwhile, the difficulty and expense of accessing the logistics market at scale is transforming the way in which investors are working with developers to deploy their capital. Instead of buying standing product, they are trying to cut themselves a slice of development profit by backing developers. Because building volume through development on a deal-by-deal basis is difficult, investors are funding largescale pan-European construction platforms. That is part of the reason why Panattoni has been expanding its geographic reach, to be able to do that faster and better across more European markets. Add to that the fact that large pan-European logistics portfolios are extremely liquid, and it explains why the region’s logistics market is becoming much more programmatic, volume-oriented and pan-European.

Do some European locations still offer comparatively attractive entry yields?

Demand from occupiers and capital providers still does not match completely, which creates buying and development opportunities. Demand fundamentals in western Poland and eastern Spain are better than in western France or eastern Germany, but that is not yet reflected in investor demand or in yields. Investors, in their high-level analysis, reason that France represents a better capital markets outlook, and much more liquidity, than Spain. The same applies for Germany versus Poland. The demand from logistics occupiers in western Poland and eastern Spain is very strong; however, while their popularity with investors has yet to catch up, the yield gap between those locations and those that are favoured by investors is wider than it should be. In fact, a warehouse in western Poland should be perceived as more attractive than one in eastern Germany, because it is still serving German demand from a location on the other side of the border, where labour is more cost-efficient. Meanwhile, there is huge demand for logistics space in France, but it is very difficult to build it. It is much easier to develop on the Spanish side of the border in areas that are still serving France. There is more land available in Poland and Spain, increasing the risk to standing assets of competition from new development, and that plays a role in shaping investors’ perceptions of value in those locations. Of course, it is more attractive to hold assets in a supply-limited location. However, it will not be long before land is scarce everywhere, and the volume of money coming into the logistics market is so high that the yield gap we still see today will soon close.

How are supply chain trends opening up new markets for industrial development?

In the past, companies were chasing efficiency, which led them to site their production platforms in low-cost global locations. Occupiers are increasingly taking the view that long supply chains are risky, so they are shortening and diversifying their supply chains and seeking to bring them closer to the end consumer, even though that generates higher costs. When the first lockdowns closed borders, businesses created temporary country-by-country supply chains to ensure continuity of supply. Those are very inefficient, so they are unlikely to persist as the pandemic becomes less of an issue. However, as long as COVID and geopolitical factors continue to cause supply chain uncertainty, we will continue to see companies setting up multiple facilities in Europe, where once they would have operated out of fewer buildings or located them elsewhere. We are seeing that trend in Western Europe, but it is Central and Eastern Europe that has been the chief beneficiary. The most visible consequence of that trend for the industrial market is that production facilities are being opened in Europe, instead of in Asia, to serve Western European demand. For example, electric vehicles destined for German and French buyers are being built in the central and Eastern part of the continent. Demand in south-eastern Europe has grown substantially. Labour is in short supply in Western Poland and the Czech Republic. Developers are unlikely to cross into Ukraine because of tensions on the Russian border, so the locations most likely to benefit are Hungary, Slovakia and Poland, which are already established markets for Panattoni, and also Romania, Serbia, Slovenia and Croatia. Increased production will drive more economic activity in those areas, so local consumption will grow as well, creating more warehouse demand. For developers, those markets were difficult to enter because the volume in each of those small countries was not sufficient to justify setting up a local development operation. However, with volumes growing significantly, it is more practical for a pan-European developer to serve those local markets. That is definitely an expansion path for us going forwards. There is still a very substantial economic development gap to be closed between those markets and Western Europe.

Are those locations also attracting more attention from investors?

Occupiers may want space in a location, but without investor demand the market is not a good prospect for developers like us. It differs from country to country, but we have seen growing investor appetite for southern and eastern Europe since the pandemic, which encourages us to go there. Investors who are looking for a bit more yield, for higher returns, cannot find that in Western European markets. There is much more potential upside in Eastern Europe. Volumes are lower but growing, and we have seen some global investors who specifically want to be in Southern and Eastern European logistics markets because there is much less competition, a bit more yield, and they still believe in the market dynamics.

Panattoni is also seeking to expand into more national markets in Western Europe. What is driving that?

Tenant demand, which is mostly for e-commerce fulfilment in areas of high consumption, is the main driver. At the same time, investors want pan-European coverage, exposure and access to product. In the past, we felt that within Western Europe, France and Italy were a bit less dynamic and more mature than some other markets. However, e-commerce growth has made those markets a more attractive prospect for developers. Creating product in France is tougher than in most other European countries. Greenfield development is limited and getting permits is difficult. We plan to progress mainly through a brownfield strategy, buying older facilities, remodelling and repositioning, demolishing, and constructing modern buildings. We have secured a site north of Paris and we are hoping to acquire a second one soon. A few other acquisitions are on target for the first quarter of 2022. In Italy, we have established a team and will probably close on two sites in the north of the country in early 2022. The fundamentals there are similar to other Western European markets, with the large e-commerce customers that we serve elsewhere also expanding there. We are also looking at Sweden. Our end-user clients want to be there because it has quite a large consumer market to serve. Property there is expensive, but it is also a very liquid market.

What are the main challenges facing European logistics developers?

At the moment, the challenges are on the supply side: land acquisition and construction costs. Supply chain issues meant that building costs have risen substantially over recent months. It is not the level of cost that presents a problem. Because there is high demand from tenants, they will pay more rent. It is the unpredictability of cost. Sharp increases halfway through a project can be difficult to absorb. There is no magic way of dealing with it. You just have to watch costs closely and have a strong relationship with your contractor and your capital provider so that the risk is shared. The yield compression we are seeing at the moment creates a natural hedge for construction cost increases and they are also likely to be offset by rental growth. When building programs have long lead times, if you cannot lock in your construction costs, you should not be locking in your final investment yield either.

Fully automated warehouse for ViaPharma at Panattoni Park Prague Airport II Green Solutions:

BREEAM Outstanding at Panattoni Park Cheb, Czech Republic for Real Digital Green Solutions:

Fitting largest solar roof in the UK for M&S at EMDC​

Panattoni’s team developed the 900,000 sq ft solar array at the Marks & Spencer’s distribution centre in Derbyshire, making this the biggest in Europe at the time of installation. The array will generate over 5,000MWh of electricity per year and reduce the building’s carbon footprint by 48,000 tonnes over 20 years. The array provides almost 25% of the energy the distribution centre needs, making it nearly self-sufficient during daytime operations.

The Marks & Spencer distribution centre also has a solar wall that allows the building to passively regulate its own internal temperature, and the enabling work included 92,000 tonnes of concrete broken out and recycled on site.

These measures earned the building a carbon neutral certificate and BREEAM ‘Excellent’ accreditation.

Delivery of Energy Park in Kettering, UK

The extension to the existing Burton Wold Wind Farm involved the installation of nine GE 1.6MW turbines, the most efficient available when commissioned, to create a new 14.4MW wind farm at the site.

The wind farm saves an average of 12,831 tonnes of CO2 each year. In its remaining 15 years of life it is expected to save another 201,000 tonnes of CO2.

As part of this project, leading members of the team also designed a prototype for local energy generation that linked renewable energy technologies, local businesses and the local community in a virtuous circle of production and consumption.

Melissa Berry

Finance Assistant

Melissa works within the Finance and Accounts department at Panattoni in the UK. Her responsibilities range from facilitating payments for the development projects in the UK, assisting with accounting activities of all invoice reports and expenses from the UK teams. Prior to joining Panattoni, Melissa achieved a First Class BA Honours from Queen Mary University of London in History as well as a Masters in Law.

Faye Burrows

London Business Support

Faye works within Panattoni’s London Business Support team, where her role revolves around a robust administrative skill set. She ensures consistent organisation within the London office and team. Faye’s great attention to detail, contributes to the smooth operation of day-to-day activities, maintaining a well-ordered and efficient work environment. As well as this she consistently manages corporate schedules and coordinating essential tasks for all areas of the Panattoni team.

Jordan Madden-Nadeau

Financial Accountant

Jordan serves as a Financial Accountant for Panattoni. He is responsible for the accounting operations within the UK and for its projects, with a particular emphasis on ensuring tax compliance and facilitating with the audit process. A qualified member of the Association of Chartered Certified Accountants (ACCA), he brings over five years of experience in the property industry to his role. 

Grace Dignum

London Business Support

Grace works within Panattoni’s London Business Support team and plays a pivotal role in ensuring the company’s seamless operations.
Working closely with the team, she contributes to the efficient functioning of the London office while offering administrative support to various members of the business. Grace also works alongside the marketing team, where her specific function involves assisting in various UK events and marketing initiatives. 

Lydia Room

Marketing Associate

Lydia works within the marketing team as a Marketing Associate. Lydia is responsible for assisting the formulation of both corporate and scheme related material for Panattoni in the UK, alongside working with Francesca on the implementation of new marketing strategies. Lydia has a first class degree in Marketing & Communications along with a strong background expertise and practice in graphic design.

Harriet Wing

Marketing & Events Manager

Harriet is the Marketing and Events Manager at Panattoni, she is responsible for co-ordinating all events at Panattoni UK. Harriet’s impeccable organisation skills are integral to making all Panattoni events as seamless as possible. Harriet works very closely with the marketing team overseeing the consistency of Panattoni’s core values and brand positioning and that they are upheld throughout Panattoni’s messaging.

Francesca Linnitt

Head of UK Marketing

Francesca is Head of Marketing for Panattoni in the UK and is responsible for developing the corporate profile and executing marketing strategies for all the UK projects. Francesca’s role includes managing the external communications for Panattoni and bringing new and innovative marketing ideas to fruition. Francesca works closely with the Panattoni European marketing team to ensure a seamless brand across Europe and has brought many new ideas into the business.

Josh Butler

Senior Project Manager

Josh is an experienced project manager at Panattoni with over 15 years’ experience in the industry, he has delivered large scale speculative and build to suit projects across the whole of the UK. Josh has been heavily involved in large site remediation schemes over the course of his career and is from an engineering background. Josh has an extensive knowledge and expertise’s of onsite delivery.

Stephen Vickers

Commercial Delivery Director

Stephen manages the commercial delivery of our developments on a national basis and works within the project management team to deliver the high complex construction projects. He has spent more than 30 years in the industrial and logistics sectors, delivering a wide range of developments in the UK and Europe. He also has a vast knowledge of delivering sustainably accredited facilities, working with BREEAM, ESG, Net Zero and GRESB frameworks.

Owen Follett

Project Delivery Director

Owen has an impressive track record in the delivery of large scale build-to-suit projects with a particular emphasis on the delivery of industrial facilities for global automotive, aerospace and e-commerce occupiers. He has been responsible for the development of over 20m sq ft of new build industrial space in the UK and internationally. Projects include new automotive plants, aerospace manufacturing facilities, research and development centres and multi-modal logistics developments. Owen now works with the development team on a national basis in the delivery of highly complex construction and infrastructure projects.

Mark Powell

Project Delivery Director

Mark is a highly experienced delivery Director with over 20 years-experience in the industry, he has delivered both speculative and build-to-suit projects for a broad cross section of clients, ranging from aviation to manufacturing. Mark is capable of quickly assessing projects and implementing strategies to ensure all aspects of the scheme are delivered to exacting standards. A Fellow of The Chartered Institute of Building, Mark can deliver the most complex and challenging schemes.

Peter Carter-Wall

Construction Director

Peter is in charge of the on-site delivery and quality control of all construction projects at Panattoni. Peter has over 20 years experience in the project management sector and now specialises in the delivery of large-scale industrial buildings, site infrastructure & remediation. Peter has worked with the management team for over 10 years and is highly regarded in the market, with a reputation for his meticulous and diligent approach to construction management.

Simon Willgress

Project Delivery Director

Simon is an experienced member of the Panattoni project management team, and has extensive client side experience in the logistics sector, having spent 13 years working within leading FTSE 100 companies. Simon is responsible for all the technical due diligence and implementation of the development programme on his projects and brings highly valuable experience of automated warehouse developments. Simon is particularly interested in low carbon design development.

Ian Anderson

Head of Project Management

Ian is a highly regarded and experienced Head of Project Management, with responsibility for procuring Panattoni’s land acquisition, build-to-suit and speculative build programme. Ian combines his practical and commercial approach, with a keen eye for detail, ensuring that all projects are delivered to the highest standard. Ian has particular expertise in the negotiation and contract tender for large scale industrial buildings, with a background in structural engineering. In the last 18 years, Ian has gained considerable experience and market knowledge in the industry.

Tanya Thewlis

Capital Markets Business Manager

Tanya is responsible for providing operational support to the Capital Markets team in the UK. Tanya assists with the formulation of capital and financing solutions and helps to maintain investor relationships. Tanya has 20 years in operational support which offers a wide skill set that allows her to assist the capital markets team in smooth operations and client management.

Tom Watkins

UK Capital Markets

Tom is an integral part of the UK Capital Markets team and works closely with Nick Cripps, providing financial assistance and analysis. At Panattoni Tom’s role includes the preparation of financial appraisals for acquisitions, preparing investment documents for Panattoni’s capital partners and consolidating Investment Committee Reports for Panattoni’s internal approval process. Tom is a member of the Royal Institute of Chartered Surveyors (MRICS).

Oliver Winchcombe

Head of Portfolio Management and ESG

Oliver manages the property and asset management of the UK portfolio, working closely with the project management and finance teams. He is an experienced property manager, having spent many years with specialist property management consultancy firms, and working on behalf of large institutional funds. He is also a member of the Royal Institution of Chartered Surveyors (MRICS).

Indy Gill

Financial Controller

Indy is the Financial Controller for Panattoni in the UK. He is responsible for the accounting activities of Panattoni and its development projects in the UK, with a focus on consulting with external auditors and tax advisors. Indy is a member of the Association of Chartered Certified Accountants (ACCA) with many years of experience in the property industry.

Scott Meakin

Development Surveyor
North West & Yorkshire

Scott is a development surveyor in the North West and Yorkshire development team. Scott has over 5 years’ experience in commercial property. He started his career in real estate consultancy where he qualified as a Chartered Surveyor. More recently, Scott has been involved in the delivery of large-scale industrial & logistics developments across the UK. Scott’s focus will be to support with the acquisition of new sites and help deliver new projects.

Ethan Greene

Development Manager
Southern England & London

Ethan is a Development Manager at Panattoni and works in the Southern England & London development team, helping to expand the business in the region. Ethan’s primary focus is to support with the acquisition of new sites and help to deliver new build development projects. Prior to Panattoni, Ethan studied Business and Economics at Trinity College Dublin, Ireland, where he graduated with a First Class Honours degree.

Alex Mitchell

Development Manager
South East & London

Alex’s role at Panattoni is to deliver new build development projects and assist in the leasing of existing speculative development. Alex is focused on London and the South East region, and works closely with Anthony Watkins in supporting the national team to expand the business. Prior to Panattoni, Alex worked for Lambert Smith Hampton as a Chartered Surveyor advising a number of blue-chip occupiers on their nationwide acquisition and build-to-suit programme.

David McGougan

Development Director
South East

David has over 17 years’ experience in customer-centric, high-quality industrial and logistics development. David is responsible for the growth of both speculative and build-to-suit developments in the South East. David has a vast knowledge of the market and has a track record of delivering over £270 million of build-to-suit and speculative developments.

Gregg Titley

Head of Development
East and West Midlands

Gregg heads the development growth strategy in the East and West Midlands region. Gregg has more than 25 years’ experience in delivering projects for blue-chip customers on both speculative and build-to-suit basis. Gregg has specialised in large-scale delivery of bespoke and sustainable development facilities.

Andrew Preston

Head of Development
North Midlands & Yorkshire

Andrew has over 15 years experience in the industrial real estate market. Andrew’s role at Panattoni is to accelerate the land acquisition programme for speculative development across the wider Midlands and Yorkshire region. Andrew has a broad breadth of experience in the commercial property sector, with a detailed knowledge of the leasing and development process and is currently responsible for some of the UK’s largest speculative development projects.

Daniel Burn

Head of Development
North West & Yorkshire

Dan leads Panattoni’s Northern office, based in Central Manchester. Dan is responsible for accelerating the company’s land purchase, build-to-suit and spec build programme across both the North West and Yorkshire Region. With 20 years transactional experience, Dan is well recognised within the market, having been involved in many of the UK’s pre-eminent industrial & logistics schemes. Since working in the sector, Dan has gained a reputation for his approachable, pragmatic and customer focused approach to business.

James Watson

Head of Development
Southern England & London

James has 15 years experience in the property market and is responsible for expanding the business in the South East region. James’s role at Panattoni is to originate and deliver both large scale speculative and build-to-suit projects. In the last three years, James has delivered over £350 million of new build projects, including some of the largest logistics build-to-suit projects in the market.

Tony Watkins

Head of Development
South East & London

Tony is responsible for expanding the company’s land and speculative build platform in the South East. Tony specialises in the execution and delivery of major industrial schemes. Tony is highly accomplished in a variety of surveying sectors, with over 25 years experience. Prior to joining the Team, Tony has held senior positions in the clean-tech and waste management industry, having previously been CEO for a bio-fuels and waste-to-energy and renewable energy business.

Nick Cripps

Head of UK Capital Markets
Director Capital Markets Europe

Nick is responsible for heading up the Capital Markets team in the UK, with responsibility for the capitalisation of projects across the UK and Europe. He forms part of the Global Capital Markets network and works closely with Panattoni’s European operating platform helping originate and structure capital solutions and manage global and Pan-European investor relationships.

Oliver Choppin

Finance Director

Oliver is the Finance Director for Panattoni in the UK, overseeing the company’s financial strategies and is responsible for all financial aspects of the UK business including structuring, debt finance, deploying capital allocations, he also works closely with Panattoni’s European finance platform. Oliver has a wealth of experience in real estate finance having spent over 20 years in various treasury and accounting roles and been involved in over £7 billion of financing deals in both public and private debt markets. He is a fellow of the Association of Chartered Certified Accountants (FCCA).

Oliver Bertram

Head of National Development

Oliver is Head of National Development for Panattoni in the UK and is responsible for the national transactional platform in the UK. Oliver is recognised within the sector as a market specialist and is known for his personable approach to business and has earned a reputation for his commitment to customer service. Oliver has completed a number of significant industrial and logistics development projects across the UK.

Fergie Taylor

Head of Development Delivery

Fergie is responsible for managing the Panattoni UK delivery platform and has been instrumental in both establishing and guiding the Panattoni supply chain and project management team. With over 30 years of experience in the logistics sector, Fergie is recognised as one of the leading delivery directors in the market, with a keen interest in both low carbon design and sustainable development. Fergie has an unparalleled track record in the delivery of major industrial facilities and has procured an extensive range of new build logistics space for a variety of blue-chip customers.

Matthew Byrom

Managing Director UK

Matthew is Managing Director of Panattoni, representing the UK on both the European and Global Investment Committees that guide the strategies and day to day operations of the business. He also leads in the identification of new business opportunities and company investment. Since forming First Industrial in 2009, which merged with Panattoni in 2017, Matthew has continued to build on his reputation for the delivery of major development projects in the UK while continuing to grow the business.

Sara Lewis

UK Business Support

Sara works within Panattoni’s Business Support team. With over 10 years’ experience at Panattoni, Sara supports the Executive Team with the day-to-day operations of the business. Sara has developed her skill set to assist across the wider Panattoni business throughout the UK.

panattoni_wind_turbine

Delivery of Energy Park in Kettering, UK

The extension to the existing Burton Wold Wind Farm involved the installation of nine GE 1.6MW turbines, the most efficient available when commissioned, to create a new 14.4MW wind farm at the site.

The wind farm saves an average of 12,831 tonnes of CO2 each year. In its remaining 15 years of life it is expected to save another 201,000 tonnes of CO2.

As part of this project, leading members of the team also designed a prototype for local energy generation that linked renewable energy technologies, local businesses and the local community in a virtuous circle of production and consumption.

Fitting largest solar roof in the UK for M&S at EMDC​

Panattoni’s team developed the 900,000 sq ft solar array at the Marks & Spencer’s distribution centre in Derbyshire, making this the biggest in Europe at the time of installation. The array will generate over 5,000MWh of electricity per year and reduce the building’s carbon footprint by 48,000 tonnes over 20 years. The array provides almost 25% of the energy the distribution centre needs, making it nearly self-sufficient during daytime operations.

The Marks & Spencer distribution centre also has a solar wall that allows the building to passively regulate its own internal temperature, and the enabling work included 92,000 tonnes of concrete broken out and recycled on site.

These measures earned the building a carbon neutral certificate and BREEAM ‘Excellent’ accreditation.