The latest edition of Savills Impacts magazine carried an article about the future of warehouses that gave seven examples of forward-thinking policies, groundbreaking warehouse designs and innovative supply chain solutions which are transforming urban logistics across the world. None of the featured examples were from the Czech Republic (there were two from the US, two from Asia and three from western Europe) for the simple reason that the factors driving such innovation aren’t present here to the same extent – yet.

As the Impacts article states, the rise of e-commerce fulfilment, the emergence of mega-regions and the continued focus on the environmental concerns of such activities all point to delivery facilities being moved closer to their final delivery points. At present, these real estate facilities tend to be located on the outskirts of cities and were built to serve bricks-and-mortar high street shops rather than the fragmented delivery destinations of today, such as customers’ homes and offices.

STUCK IN TRAFFIC

Rising congestion in cities is a big driver in pushing facilities nearer to the end-consumer and forcing innovative designs to maximise floor space. According to the TomTom Traffic Index, Mexico City is the most congested city with a 63 per cent increase in travel time compared with free-flowing traffic. In the top 25 of congested cities, 10 of them are found in China, suggesting that these cities will be high on the list to benefit from urban logistics innovation. Indeed, the article cites China’s plan to build 150 logistics hubs by 2025 as an example of how policy intervention can impact real estate markets and facilitate logistics development in the future. Prague, by contrast, ranks way down in 94^th spot on the TomTom Traffic Index of most congested cities, with just a 28 per cent increase in travel time compared with free-flowing traffic. 

Another factor in determining how modern logistics requirements are shaping real estate is the size of the online retail market. Measured by online internet sales as a percentage of total retail sales, the UK has the highest online retail penetration rate in Europe with the figure recently reaching 21.4 per cent, according to US market research company Forrester. This has led to innovations like parcel delivery company DPD’s first all-electric distribution centre in London, from where 2,000 parcels a day will be delivered by all-electric vehicles exclusively to the capital’s SW1 postcode area. DPD expects to open seven more micro all-electric units across the city.

Savills notes that when the online retail penetration rate hit 11 per cent in the UK there was a surge in demand for warehouse space, as additional deliveries associated with this form of retail require extra warehouse space. According to Forrester, only Germany has also passed this 11 per cent mark, though demand for urban logistics units in France and the Nordic countries is likely to surge as they are forecast to be next to pass the 11 per cent threshold. The Czech Republic, by contrast, was forecast by Forrester to have had an online retail penetration rate of 8.2 per cent at the end of 2018, still below the European average of 8.8 per cent.

Other property and non-property factors in the Czech Republic also mitigate against the immediate need for the kind of innovative warehouses and supply chain solutions featured in the Impacts report. The Czech Republic’s average industrial and logistics vacancy rate stood at 4.6 per cent at the end of 2018, compared with very low 2.5 per cent of the UK. And non-property factors at play include Prague’s relatively low population density of 4,410 people per sq km, compared with other large global capitals such as Paris, the city with Europe’s highest population density at 20,909 per sq km.

Sign of progress

That’s not to say innovation in warehouses and supply chain solutions in the Czech Republic is not already happening. In 2017 Czech retailer Sportisimo moved into its new 33,700 sq m build-to-suit facility at Prologis Park Prague-Rudna. The environmentally advanced building was the first logistics facility in the Czech Republic to receive BREEAM’s highest accreditation rating of “Outstanding” and only the second such building in all of CEE to receive such a rating.

Other innovative structures include a fully automated 40-metre tall storage facility for the retailer Lidl in Buštěhrad by Kladno, 25km northwest of Prague, and a facility built by CTP for Metro Cash & Carry in Úžice, located north of Prague by the D8 highway. These facilities combine automated systems with food processing, chilled and frozen storage. There are other examples of hi-tech facilities in Brno: technology suppliers like Thermo Fisher Scientific and Honeywell have R&D centres located next to their production and storage facilities, filled with temperature and humidity control systems and other electronic devices that enable the management of such properties.

So, innovation yes, but not to the extent that the likes of the 22-storey Goodman Interlink logistics facility on Tsing Yi island in Hong Kong will be needed anytime soon in the Czech Republic.