Do we need more warehouses? How do they affect our lives? Bert Hesselink of CBRE says one of the goals of the new Art of Space project is to make this country a better place to live. How does he want to achieve this? What’s the current situation of the Czech industrial real estate market? And what are the trends for the future?
Your new project — the Art of Space website — focuses on industrial estate. How does this particular field affect our lives? Isn’t it just taking up space? Do people actually need such buildings at all?
First of all, warehouses employ a lot of people. So they create jobs. And the jobs pay salaries. If we don’t create spaces for companies to employ people, where are we going to work? When companies decide to set up production or have a distribution centre, they choose between countries, and then they choose between places. They might well go to Poland or the Netherlands. They don’t end up here, and they won’t create work for Czech people.
Second, they create the spaces in which we work. Many of us have full-time jobs and spend 40 hours a week there. Let’s make those spaces a bit nicer and create a better working atmosphere.
That’s the direct impact.
The indirect impact is that they provide us with places through which we shop. All the apples and T-shirts and televisions we buy must be produced somewhere. Did you know it’s actually cheaper if they go through a warehouse than directly from the factory? It’s also more sustainable. So, we can say warehouses provide the comfort of living.
Why don’t we employ architects to make these places nicer?
We’re doing this more and more. That’s good. And I believe we’ll continue doing it more and more. Architects are one group of professionals we want to work with actively in this project. What we see happening with offices in the Czech Republic — it started several years ago already — is that architects are becoming more involved in creating workplaces. Historically, most local companies don’t want to use architects very much. So it’s been really tough here, but it’s getting better. More companies see the benefit of using an architect to create an attractive workspace. And now it’s starting to happen in industrial spaces, too. With both the exteriors and the interiors of the buildings.
What’s the situation on the Czech real estate market like in general? How far have we come compared with the rest of Europe?
Real estate usually isn’t the No. 1 topic for investors, the end users of spaces. Real estate is more of a consequence. Simply put, they make location decisions on the basis of the cost of labour and transportation and then of the cost of real estate. For some companies, the cost of labour is much more important than the transportation costs. For other companies, the opposite is true. But for most companies, real estate is just a small portion of the total costs. Like I said, it’s rather a consequence.
If I take logistics or manufacturing as an example, the more labour-intensive operations tend to go further east, where labour is cheaper, while the more transportation-intensive operations tend to end up in the Czech Republic because it’s in the very heart of Europe. Usually, such companies hesitate between the Czech Republic and western Poland. And at this point, real estate becomes a factor that affects their decisions.
What is very important for companies is the predictability of having the space ready when they need it. It’s an issue both here and in Poland. However, sometimes it’s easier to get the permits in Poland, so they wind up there.
How do you see the Czech industrial estate market? Is it comparable to other European countries? Are Czech industrial zones better in any way, perhaps?
One part of the decision-making process is also the perception and feeling, an overall impression. Real estate is an important part of this. Let’s think of a company that is deciding between an industrial zone in the Czech Republic and another in Poland. At the end of the process, it usually goes to visit the place. The built-up environment, the way it looks and feels, has quite an impact. So if we present it well, as professional and ourselves as professionals, it usually has a positive influence on the location decision. And, I have to say, this country’s doing pretty well here.
Where are we in terms of industrial real estate compared with the rest of Europe? The modern, new spaces that are built meet European standards. They have a very good quality and are comparable to those in Western Europe. Cost is still quite an important component, especially in this part of the continent. It’s true that we’re not the most advanced in terms of sustainability, and we’re not the most innovative when it comes to warehouses, but we’re efficient. It’s not super fantastic, but it’s OK.
If you look at industrial zones, you see a big difference between cities. Some have great and well-prepared industrial zones that function properly and are well integrated into the rest of the city. But other cities in the Czech Republic simply don’t have them at all.
To be more specific, when you go to Cheb, the new industrial zone presents itself very well; when you go to Ústí nad Labem, you’ll struggle to find one. You can’t generalise here.
I see a huge opportunity. We’re now 28 years after the fall of communism, and when I come back from holiday, say from Austria, and I cross the borders, I still get depressed. The nature’s beautiful, but the built-up environment is still — still, after 28 years! — not in such a good condition. And that has an impact on our daily experience. It’s a problem but at the same time also a huge opportunity.
In the Netherlands, it’s so boring, because everything is perfect. Every square metre is planned. For me as a professional, it’s not very challenging there. Here we have so much opportunity. Even in Prague: You walk on a beautifully renovated street, you turn a corner, and you see ruins of houses.
What specifically can CBRE offer visitors to the Art of Space website? What is the company’s role and position on the industrial estate market?
We can share expertise from CBRE around the world, as well as expertise from other professionals and from our clients with the wider public. We’re advisors, so we’re in the middle of the market connecting many different parties.
What more do we have to offer? When it comes to industrial logistical space, we have two types of clients. One, the owners of the warehouses. We help them to make sure they get a return on their investment. And two, the end users. This is what I personally enjoy the most. Here we help companies make sure they have the space they need to run a successful business.
So all of this is what we can offer our readers, too: It doesn’t matter in which stage of the life cycle the real estate is – whether they’re planning it, or it exists and they want to sell it, or they want to build something, or they want to upgrade or expand an existing building, or they need to manage it… we’re able to make sure they get the best out of their space.
What are the trends in industrial estate? Do we need more and more new industrial zones? Isn’t extending the existing ones the way to go, maybe by making them into multiple-floor buildings?
Personally, I don’t like to take nature away to build warehouses. But let’s look at the current situation first. Car production rose 10 per cent in the Czech Republic since last year. We need more space to produce 10 per cent more cars, obviously.
In general, if the economy grows, it doesn’t necessarily mean more space is needed, but usually it is the result. For car production, though, it’s the case.
What’s happening now at the same time is that the world is changing. It always will. And, of course, it affects the type of space we need. As I said, the way we shop is changing, and we do need more warehouses for that.
Another thing is that we’re more and more aware of the impact on the climate; we’re more and more interested in sustainability and energy efficiency. This all affects real estate. Nowadays, if you’re looking for a flat, you’ll probably be more interested in how energy-efficient it is than some 10 years ago.
The way we produce is changing, too: We use more and more robots. I heard the other day that the first factory where only robots will work is being built in the Czech Republic. What type of space do they need?
As for the vertical, multi-floor warehouses that are being built in Asia: There are many huge cities with millions and millions of people. And there’s this trend that people — but also companies, like restaurants — want their goods delivered more quickly and as cheaply as possible.
If you do that from warehouses outside the city, it’s going to be more expensive and probably take longer. A big issue is traffic congestion, too. So it might make sense to have the warehouses in the city and construct them as multiple-floor so they won’t take up so much space. This is happening now in London and Paris.
Do we need this in Prague as well? Let’s talk about it! At the moment, the city of Prague isn’t addressing this topic at all. The way we shop and the fact that we want our goods delivered quickly and cheaply — are we listening to e-commerce companies? Prague looks at brownfield and thinks we need to redevelop them into residential areas but forgets about other types of use. OK, residential space and offices look nice, but we also need to work. We need places where our products come from.
We need to make sure Prague continues working. It won’t work if there aren’t warehouses. So brownfields are actually a great opportunity to be turned into modern and more efficient warehouses.
Be a visionary for a moment and look into the distant future. How will it look in industrial real estate?
Bigger and smaller. Generally speaking, we’ll need bigger spaces to organise the supply chain more efficiently. And we’ll need smaller places for exactly the same reason.
If you look at autonomous vehicles and also at the effect of electric cars, I think we can have those huge warehouses out of sight. They can be in the middle of nowhere because they can be operated by robots. And they can be far away because there’ll be autonomous vehicles — so the time drivers spend delivering will no longer matter. Also, when we have trucks that no longer pollute the environment, the kilometres won’t be an issue either.
Then, we’ll need small warehouses inside cities where we’ll be able to pick up our goods. And I mean really small places – in offices, for example, or in shopping centres.
Or maybe they won’t be needed anymore? If I have a car with a place to put the parcel in, I’ll say, ‘At 5 p.m. this afternoon, it’ll be parked there and there’, and a robot or a drone will just drop my parcel off right there.