As with other market sectors, specification, sustainability, interior design and fit-out are increasingly central issues for industrial project owners in attracting tenants.
With built-to-suit (BTS) development the preferred option, developers and tenants can agree on specifications at the initial design stage of a development. This is important as the requirements of e-commerce, retail and automotive companies are increasingly sophisticated. Logistics park owners such as Prologis, CTP, Logicor and Goodman apply similar specification and sustainability policies throughout Western Europe, Central Europe and Hungary.
“Due to e-commerce, automotive changes, automatization and robotization changes in the production industry, there will be a continuous requirement for modern or upgraded industrial and logistics space,” comments Ferdinand Hlobil, head of CE industrial at Cushman & Wakefield.
The CTP portfolio, for example, has mainly grown through new construction. “This has positively influenced CTP’s buildings’ average age, which remains at a stable eight years. E-commerce, production and logistics have dominated the real estate market,” CTP says.
Most industrial activities require very similar types of properties and it is usually in the additional (tenant specific) fit-out that variations will be evident. This is generally labelled as “above-standard tenant improvements” and, according to the agreement, may be charged fully or partially on the tenant according to Gábor Halász-Csatári, head of industrial at Cushman & Wakefield Hungary.
E-commerce, for example, needs a very modern and automatized internal sorting and shipping system; these are usually tailor made and require additional electrical capacity.
Retailers tend to require ambient and some cold storage space: 10-12 degrees centigrade for fruit and vegetables, 0-4 degrees for meat and dairy, and often companies will also require freezing units of -20 degrees C or more to ensure they can cover the entire spectrum of goods. These constructions require special fit-out, electrical capacity, cooling equipment and hazmat storage, etc.
“Automotive firms generally require a higher than average power capacity, room for machines and equipment, perhaps higher floor loading capacity, hazardous waste management and larger social areas for workers to change and eat,” explains Halász-Csatári.
With regard to the development process, Hlobil sees the fit-out charge as constituting the largest part of the budget. This is needed to achieve a standard of product that conforms to the needs of automotive and e-commerce companies.
Wing has undertaken construction of the East Gate Business Park that, on completion, will consist of 140,000 sqm of logistics and industrial space, according to the development plans.
According to the developer, the complex will offer custom solutions, flexible choices of hall size, consultation from the design phase, tailored architectural and interior design solutions, visualization of custom corporate identity and meeting rooms and community space, all according to needs.
As for the specification differentiation between BTS and speculative builds, Halász-Csatári argues: “BTS will always focus more on tenant specific requirements to meet their needs more. Speculative developments aim to deliver a standard property which will be suitable (if with minor alterations) to a wide range of users, be that logistics, retail, etc. BTS is much more specific and, as a result, often requires a longer commitment term from the tenant.”
As the Central European industrial markets are dominated by international industrial and logistics park operators serving international tenants, the quality of space and the requirements on the demand side are generally regarded as being of a similar quality to that found in Western Europe.
“I believe the logistics side of industrial is of similar quality. And investors are coming to expect that. Some have achieved BREEAM ‘Outstanding’ certification,” says Mark Robinson, CEE research specialist at Colliers International.
“The increase in stock in the region seen in recent year implies that a lot of brand new buildings have been constructed and likely thus fitted out according to the latest customer demands. This is including, for example, the Amazon fulfillment centers in Czech Republic and Poland that are serving Germany and Western Europe; Amazon are state-of-the-art. On top of that, the portfolio purchases of P3 by GIC and Logicor by CIC in the last two years were Europe-wide transactions; similar standards of operation exist across their portfolios,” Robinson says.
The number of certified industrial properties in Hungary has increased considerably according to Colliers International. Prologis Park Sziget has obtained BREEAM new construction certification and the new plant of Becton Dickinson Tatabánya is LEED certified.
Prologis has been awarded BREEAM “Outstanding” certification for a facility built for the sports retailer, Sportisimo at prologist Park Prague-Rudná. All Prologis facilities in CEE Europe are being submitted for BREEAM accreditation upon completion according to the company.
CTP has more than 4.5 million sqm of class “A” industrial and logistics properties in CEE and is now committed to developing BREEAM accredited buildings. Two buildings at CTPark Plzeň in Czech Republic have already received BREEAM “Very good” certification.
“CTP continues in its efforts to support sustainable long-term development and continues to build efficiently to ensure the least negative impact on the environment,” says the company. “In the past year, CTP has installed innovative systems to measure consumption, and more effective ventilation units for better heat transfer. It also continued with LED lighting installation across its entire portfolio.”
Remon Vos, CEO of CTP, sees companies adapting to the new market conditions, such as industry 4.0, increasing automation, IoT, and other new technologies.
“These trends will require smarter buildings, higher standards, and greater customization,” he says.