Two million parcels in 24 hours: Black Friday puts logistics to test
Logistics players are getting ready in advance for the biggest sales event of the year with different sized warehouses located in strategic areas of the Spanish geography.
Proximity, flexibility and bigger surfaces. The Spanish logistics sector will face the most important sales event of the year putting into practice the lessons learned in previous years. Players and investors are getting ready in advance for the event, implanted in Spain more than five years ago, with different sized warehouses, flexible rents and plants located in the most strategic areas of the national geography.
The investment in Spanish logistics market surpassed 1.2 billion euros in 2018, a 40% more than in the same period last year, according to the last estimations of Savills Aguirre Newman. That investment appetite comes specifically from the consumer’s recovery of trust and the peak of electronic commerce, which boosts up in days such as Black Friday or Cyber Monday, Christmas holidays or during sales.
“The complexity of these events relies on the management of the huge volume of transactions that take place in a really short time”, claims Pere Morcillo, head of industrial and logistics agency at JLL in Spain. During days such as Black Friday, according to Javier Martín, asset manager at TH Real Estate, “about 6% of annual sales are concentrated, sending out about two million parcels in only 24 hours”.
During days such as Black Friday, companies send out about two million parcels in only 24 hours
This frenetic activity pushes many companies to operate in bigger and more prepared spaces. It is nonetheless a punctual activity that, for Alberto Larrazábal, general manager of the industrial and logistics area at Cbre in Spain, causes logistics centres’ lease contracts to be shorter every time, of two months at most. “Furthermore, in these cases nearby industrial units are rented, close to big cities and focused on urban distribution”, adds the executive.
Nevertheless, not all owners of logistics assets are willing to adapt to the demands of e-commerce players, who require more flexible spaces in time and occupation. As a consequence, “the tendency is that rents for these sorts of lessees will probably increase in the next few years”, forecasts Larrazábal.
The increase of rent prices and the scarcity of products in prime cities such as Madrid and Barcelona motivate likewise that secondary markets start to be consolidated as attraction focuses for logistics investors. “Huge platforms away from urban centres are necessary for the reception of products and its afterward management” explains JLL’s executive.
Secondary markets start to be consolidated as attraction focuses for logistics investors
The XXL format, usually located in second and third areas, must co-exist with smaller sized platforms situated in the first one, at around 20 kilometers from the heart of the cities. “Smaller centres are used for daily entrances and exits of smaller orders that complement bigger sized ones”, claims the executive from TH Real Estate, who exemplifies this with Amazon, present in province capitals around Spain but lessee of an industrial unit of more than 100,000 square metres of surface in Illescas (Toledo, Spain).
Ahead of the future, both Cbre and JLL’s executives forecast that the number of urban warehouses will be higher every time, promoted by the consolidation of digital commerce. “Players will be forced to get close to the city centre so as to favour fast deliveries to the final client and thus satisfy the constant sourcing to the stores from the centre which have continuous changes in their product lines”, explains Larrazábal.
The favourite warehouses of investors
Even though the most demanded product is still the triple-A industrial unit, there is a new rising trend for the search of warehouses whose typology is not solely logistics but that has the potential to transform too, thus offering a greater profitability.
“It is not just about building an unobstructed and high warehouse. Other not so standard things have to be taken into consideration too, such as mezzanine floors, accesses and the combination of cross-dock and logistics”, claims Gloria Valverde, head of the industrial and logistics area at Savills Aguirre Newman in Barcelona.
The situation, the state, the quality of the space, the rent contract and the solidity of the tenant are equally important. “The investor thinks that having a huge brand as a renter is a complete success: it gives prestige and normally, companies sig for longer periods of rent”, explains Pere Morcillo, who also assures that “what is important is knowing how to adapt to the demand over time”.
It is precisely the need to answer the demands of players that pushes investors not only to acquire logistics assets but also developing projects from scratch. “Both the scarcity of XXL and XXXL warehouses as the lack of product appropriate to the requirements of e-commerce players is resulting into the release of an important number of risky promotions and turn-key contracts, especially in prime locations”, explains Cbre executive.
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