Even though logistics is the real estate sector least affected by the current economic downturn, tenants are still looking to cut costs and this is what landlords need to respond to. Ana Dumitrache, Country Head at CTP Romania, who will be a speaker at our upcoming SEE Property Forum 2020 in Bucharest, talked to us about how COVID-19 has impacted the company’s operations, what tenants are looking for and how an ambitious expansion strategy can be executed.
Logistics is regarded as the sector least affected by the COVID-19 crisis. Can you corroborate that based on the experiences of 2020 so far?
Indeed, there is no major negative fact for us to report so far, everything was going just normal with a little bit of more work for us to do in understanding the clients and answering their needs. Logistics is vital for all economic sectors and it became even more important in this whole context when the goods are rather delivered home than bought in the stores, so while retail has to suffer a lot, logistics is increasing its value and is in bigger demand.
How has the pandemic impacted your development and leasing process? Has it resulted in any significant changes in your property management strategy?
We have kept all our developments on track, they were all well-financed and our contractors were working without interruption. There were additional health measures taken, but those did not have any impact on the delivery terms of buildings. On the contrary, probably because other sites were stopped and not many new projects started construction, we were able to deliver some projects ahead of schedule. The leasing process also went smoothly, some tenant decisions were made more slowly while others were forced to act fast, so it all balanced itself out. In terms of property management, we were striving to reduce the costs and we succeeded, even before our tenants came to us asking for it – which was well received, of course. We were extra careful with health and safety measures, but so far so good, we did not have any reported COVID-19 cases amongst our park managers and only very limited at the clients’ level.
Do you expect any changes to Romania’s attractiveness as a logistics destination due to COVID-19?
I think Romania is a destination for regional distribution and if we are smart enough, we will focus on infrastructure and deliver it and then we can be booming while others are talking about the crisis.
CTP has significantly expanded its Romanian portfolio by acquisitions and new developments over the last couple of years. What is your plan for further expansion? Are there any new acquisitions or new development locations in the pipeline?
We have opened ctPark Bucharest North this year as a new location and have delivered the first 20,000 sqm and are very advanced on the second phase with 20,000 sqm. We have a few acquisitions ready to close this year. We are currently at above 1.3 million sqm in the country, will end the year with 1.5 million sqm and for the next year, we are targeting 2 million sqm – based both on organic growth through buildings we deliver and on acquisitions.
How do you expect financing conditions to change over the next 12 months? Do you see banks in the region being more open to financing industrial/logistics property compared to other asset types?
We can report no change in the risk management approach of the banks towards us, we did obtain financing this year without problems. The only real issue was the timing as banks were hardly keeping up with our speed of development. It is understandable, as they are in work from home mode and it took time for everyone to adjust to that and also I believe that decision-making processes are more difficult when people are working remotely because trust is something which is based a lot on non-verbal communication and presence. What we did notice was an increase in the cost of financing at the beginning of the pandemic, but now we think it has stabilised and things are getting back to normal as far as the logistics segment is concerned.
CTP plans to have its entire portfolio certified under BREEAM In-Use by 2020. How’s the certification progressing in Romania? Have you observed a mentality shift with tenants looking to lease sustainable properties?
We have only one certificate pending now – the rest of the portfolio is already certified, so we are keeping up with our plans. Tenants are appreciating the green orientation but what is more important for them is that we don’t just deliver a piece of paper, but good quality, energy-saving buildings and our total cost of occupation is great. Actually, the average utility cost at our buildings is three times lower than at any of our competitors on the market. This is what our existing tenants are really appreciating, that turning on the heating is really optional during winter and air conditioning is unnecessary during summer.
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