NO STONE UNTURNED: "REDEVELOPING LOGSTICS ASSESTS IS EASIER THAN BUILDING NEW ONES"

Existing buildings are becoming more attractive than new builds in the Dutch logistics & industrial sector. An existing building already has a zoning plan, power supply and nitrogen rights, says Martien van Deursen, Head of Benelux at Arrow Capital Partners. He believes that the development of new projects is increasingly complicated due to a number of challenges.

The fast-growing Dutch logistics sector – mainly distribution centres – is impacted by an overcrowded electricity grid, which means that, in certain areas, companies no longer have access to a new connection. In addition, the nitrogen dossier is limiting construction, the prices of building materials have risen sharply and there is a general economic downturn. However, all these problems actually offer opportunities for developing existing buildings.

“Existing buildings are becoming more attractive,” says Van Deursen. “They already have a power supply, they already have nitrogen rights and there is already a zoning plan. The latter often allows you to build on a larger part of the land, or you can build higher than the existing buildings. For many of those old buildings, there is now an opportunity to turn them into more modern buildings.”

He gives a few examples from his own portfolio. “We have an existing distribution centre on a large plot. It does not meet modern standards: it has a relatively low building height and only has a few loading docks. If you make a plan with the tenant and look to the future, you can create a larger building on the same plot. ” In this case, the building will be demolished and a new, larger distribution centre will be built. "A good investment, and also attractive for the tenant."

Van Deursen also sees opportunities in adding value without demolition. “For example, with a fast-growing tenant who wants to expand, we can develop something new to complement the existing building." Often there are parts of the land that can still be built on, or the building’s height can be increased.

Rents

Another important development in logistics is the rental price. It has risen sharply in recent years, and the end is not yet in sight, according to Van Deursen. “We have seen rents rise to a level we did not expect to see. In Amsterdam we are now at a hundred Euros per square metre, where a few years ago it was eighty. We think rents will continue to rise faster than inflation.”

After all, demand continues to grow faster than supply, says Van Deursen. In addition, land for logistics is scarce, and e-commerce is still growing. "Maybe less than before, but it's still growing. Moreover, a lot of industrial activity is returning to the Netherlands, especially lighter industry. That will have a positive impact on the logistics sector.”