Shifting Property Values and Zoning Could Unlock Smaller, More Centrally Located Logistics Facilities in Europe
The logistics sector is undergoing something of a renaissance. While other sectors have struggled, the ongoing expansion in logistics, driven largely by e-commerce, gives further indication of its resilience to the COVID-19 crisis.
Thomas Poulis-Leinberger, head of asset management and development logistics, Europe, at AEW, moderated a ULI Europe webinar titled “What’s NEXT in Urban Logistics,” sponsored by ULI NEXT. The event looked at the “new normal,” including the possibilities of drone delivery and how a downturn could free up more locations in central business districts.
Location is key for businesses in the sector, said Dirk Sosef, European head of research and strategy at Prologis. To have a viable product, companies need to be able to deliver goods quickly on a large scale. Out-of-town facilities can be significantly cheaper to occupy than central locations, but without the efficient deployment and delivery that a central location allows, there is little to be gained from cheaper rents.
Because zoning is another issue that affects feasibility through site constraints, it is crucial that occupiers of logistics space consider the viability of the product they are offering and meet the gap between supply and demand.
Yaniv Gelnik, global business development lead at Zipline, is doing just that with his business—a drone delivery system designed to quickly deliver health care supplies to hospitals in rural locations.
With four distribution centers in Ghana and two in Rwanda, the company uses fixed-wing aircrafts to deliver supplies on demand. The company has the technology to maintain the temperature of the product and drop it within a 10-foot (3 m) radius of the customer, and has its own drone traffic management system for coordinating with local civil aviation authorities.
This model is successful largely because of its necessity, Gelnik said. Interest in drone delivery is rapidly rising in other locations, but the point of the product has to be considered.
Drones are needed, he said, because they are faster than traditional transport methods, which is why transporting health care supplies across vast distances in areas with poor infrastructure makes sense. But urban drone deliveries for food or nonessential goods are seen as less viable, particularly when companies such as Amazon and London-based Deliveroo already can do same-day delivery, often within 30 minutes.
For this reason, Gelnik believes the main challenges facing logistics companies are not regulatory or technological, but demand driven.
To meet this challenge, logistics spaces need to move toward the provision of different functions and amenities to create attractive, mixed-use buildings, combining this use with office space and retail, Sosef said.
The benefit for urban centers under this new model could be significant, he said. With the development and deployment of electric fleets such as drone delivery and Tesla’s hyperloop technology in urban centers, business in the logistics sector could help drive forward efficient, sustainable methods of transportation that ease traffic congestion and reduce air and noise pollution.
So far, Sosef pointed out, few public bodies have sought to capitalize on this opportunity. On the growing list of development priorities held by many councils and government organizations, logistics is at the bottom. The key task for the industry now is to advocate for the growing role of logistics and demonstrate its value for town and city centers, Sosef said.