Pressure on financing is not the only challenge

The steeply increased pressure on financing is not the only challenge facing the logistics sector. The social debate about the so-called ‘boxing’ of the Dutch landscape still persists. There are even calls from politicians for a construction freeze on distribution centres. 3 On top of that, the sector still faces land scarcity, limited capacity on the power grid and delays in granting building permits, partly due to nitrogen issues.

Many investors are therefore forced to divert to redevelopment of brownfield sites.

In other words: transforming existing commercial space into logistics space that meet today's requirements. After all, this existing stock usually represents a substantially lower value than logistics products, which have strong market demand.

Initial insight into the redevelopment potential of brownfield sites near hotspots

Finding a suitable brownfield site can also be a challenging endeavour. Many factors play a role in determining a site’s redevelopment potential.

Two relevant considerations in this regard: what is the site’s rental growth potential and how old is the stock at this site?

For these considerations, Savills has made an analysis of the current average rent at brownfield sites in municipalities surrounding the logistics hotspots and their expected rent after redevelopment into logistics property, based on the top rents in the hotspots. This offers a first indication of the rental growth potential of the areas around the logistics hotspots. The analysis has also examined the average year of construction of the stock at brownfield sites in the municipalities surrounding the logistics hotspots. 4 These two factors combined provide an initial indication of the redevelopment potential of the municipalities around hotspots.

Sources 4 This is a weighted average of the year of construction of the stock, by square metres of stock in the relevant peripheral municipalities.

Relatively high potential around large cities

This initial analysis shows that the redevelopment potential is relatively high around the following logistics hotspots: Schiphol, Amsterdam, Bleiswijk-Waddinxveen, Rotterdam and Utrecht-Nieuwegein. The fact that the potential is especially centred around major cities can be explained by the significant scarcity of logistics property in these hotspots. The result: low vacancy rates and sharply increased rents, allowing for a relatively large leap in rent.

This particularly applies to Schiphol. Moreover, the stock at brownfield sites on the outskirts of these traditional logistics hotspots is relatively old.

The next challenge, however, immediately arises with these high-scoring areas: suitable brownfield sites centred around major cities are scarce. For Schiphol in particular, the high rents are justified by their direct connection to the airport. A peripheral municipality does not offer that added value, making comparable rent levels unlikely. That said, the outcome of this analysis does not mean that other areas lack redevelopment potential. The analysis provides an initial insight into the redevelopment potential based on two relevant factors. Investment opportunities may also be present in other areas, although current market conditions make the search for investment opportunities more challenging.

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