Milan Kratina, CEO of Czech-based logistics developer Accolade talked to Property Forum about investment plans, environmental awareness and the current eagerness of banks to finance new warehousing projects.
You’re joining the still small but growing list of companies that intend to conquer Europe from CEE. After the Czech Republic. Poland, Slovakia and Germany, you also plan to enter the Dutch and Spanish markets. Can you share how this expansion strategy evolved? Why these markets?
Our long-term goal is to build a European portfolio of modern, environmentally-friendly industrial parks and, together with our investors, to create a space for a sustainable future for business in Europe. We developed our business mainly in the Czech Republic and Poland. Even though we only have one home we already feel like that in Poland with the attitude and relationship we made in the Polish cities. We hit the best times and got lucky for our business’s segment. There was a lot of demand for modern warehouses, and we keep it going and our plan is to build quality hubs all around the key strategic cities. That is also the goal in other markets.
Because of the dynamic growth of logistics, e-commerce, and light production we see the hunger for quality modern halls. We are flexible and we try to respond quickly to current developments in the European market and see new opportunities. And why did we enter these markets? Our investment activities are long-term and therefore we build a healthy and balanced portfolio. There’s probably no need to comment on the importance of the German market. This is an extremely liquid market, which is a big plus given the nature of our business. The Dutch investment of €40 million is a logical step in the diversification of our portfolio towards Western Europe and follows the growth of modern complexes in nearby German cities. We are entering the Spanish market with two locations, which form a great basis for further portfolio growth in one of the fastest-growing logistics and warehousing markets in Southern Europe. Local demand for halls of the highest technological and ecological class significantly exceeds supply.
Do you have plans to enter further markets in Europe?
We are now one of the major players in the CEE region and we also want to play a bigger role in Western Europe. Logically, the long-term goal is to „conquer” the whole of Europe, but we need to keep it sustainable. As long as there is a demand from tenants, we will grow organically and that is the right way to go. If you look at the map of our investments, logically we are already looking for markets close by and maybe, there will be a surprise later this year.
Speaking of the Polish warehouse market, Accolade is famous for its brownfield revitalization strategy for new investments. Is this strategy related to the sky-rocketing prices of greenfield development plots?
Today, almost 40 percent of our whole portfolio are brownfield projects, up to 43 % in Poland. Revitalization of brownfield is rooted in the company's DNA, where we place emphasis on building environmentally friendly industrial parks as part of the ESG commitments. In addition, due to the history of industrial production, brownfields are often located near large cities and their wider centres. Together with good transport accessibility, these areas represent an investment-strategic opportunity for both parties, both for us and for future tenants.
How long will the boom in the warehouse market last? Are you not afraid that the growth of e-commerce will slow down after the pandemic?
I would say rather that the pandemic showed how important a role the halls and parks play in supplying us all. At the same time, the fact that quality infrastructure around large cities is essential for their smooth functioning was underlined. The digital economy and the sale of goods over the Internet are thus becoming increasingly important. However, nothing changes the fact that the background to the success of e-commerce is and always will be quality logistics and warehousing.
Banks currently seem to be really eager to finance warehouse projects. Is that also your impression?
Yes, banks have found that industrial real estate is an increasingly interesting investment opportunity with long-term sustainable returns. It was also supported by the pandemic and the subsequent significant growth in the field of e-commerce and the related increase in demand for quality industrial halls. The future came much earlier than we expected, and I am really glad that we are ready to help it develop. Honestly, I think the best is still ahead of us.
Accolade claims to be an environmentally aware company. What does it take to build a really environmentally friendly warehouse, which doesn`t need any „greenwashing” marketing?
Currently, we have one of the greenest portfolios of modern industrial buildings in the CEE region confirmed by BREEAM certifications. It is mainly because we started a sustainable and environmental approach in industrial real-estate from the beginning. We are not jumping on the trendy marketing bandwagon, we really do act. We can actually show some case studies and what we have already done. But of course, I would like to thank the new 2020 "quick yeast eco-people" for finally realizing that the sustainable future of our planet is in our hands.
If we are talking about an environmentally friendly approach, we should also talk about the hard proofs. I am proud that all our buildings got the prestigious BREEAM certification and last year one of them was awarded as the most environmentally friendly industrial building in the world with a record score of 90.68%. This cooperation with others shows that we are on the right track. The record-breaking building is in former brownfield space in Cheb, Czech Republic and it was built on the site of a decaying area of former engineering works. We recycled up to 90% of construction waste during the construction of this modern hall. Thanks to the unique rainwater flushing system for toilets, the consumption of drinking water has been reduced by an incredible 84% compared to the industry standard. The hall is also equipped with smart LED lighting, measurement, and optimization of energy consumption and exterior blinds, which significantly save the energy needed for heating or air conditioning. The surroundings of the hall also have an insect hotel and an outdoor gym for employees. All this contributes to a 56% reduction in energy consumption and a 58% reduction in carbon footprint. Thanks to our approach, we can say that we are the green-share in the industrial real-estate world.
Analysts forecast that many companies will move at least part of their production activities to Europe to avoid a repeat of the sudden break in supply chains with China. Do you see the first signs of nearshoring among your customers?
According to estimates by consulting companies, the current time will bring greater demand for industrial real estate, but also different tenants and different use of halls. The break in air transport and production in China has shown how easily production and supply chains can fall apart, leading part of the production to actually move to Europe. In practice, this is really happening. In one of our parks, we have a new tenant who has started producing medical devices, including respirators. The company leased eight thousand metres for five years. There was also Brexit which has been overlooked and which had some impact on European business. For example, Marmon Foodservice Technologies, a company in Warren Buffett´s portfolio, moved to our complex near Brno Airport because of the complications for business following the EU/UK divorce.
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