Built-to-suit construction near large cities dominates industrial development

Is it worthwhile for companies to invest in a build to suit hall, or is it more economical to move to wherever is vacant at the moment? Why is, among other things, a city architect involved in the upcoming industrial park in the centre of Ostrava? And is it true that industrial parks situated at German borders are doing better?

We talked about this with Tomáš Kubín (TK) and Daniel Kubizňák (DK) from the development company P3. Tomáš Kubín manages construction of the company throughout Central Europe; Daniel Kubizňák is in charge of leasing and development of P3’s Czech industrial real estate portfolio.

Many companies have been forced to move their activities to the e-commerce environment. How did this situation affect industrial development?

DK: E-commerce has been growing steadily for over 10 years in Europe and industrial development goes to meet it halfway. However, the current situation is specific for demand spiked in the most desirable locations within or directly in close proximity to larger towns. This is understandable given the enormous interest in online sales and distribution. This also applies more and more to the food segment.

Food storage certainly has specific requirements. How flexible can you be with regards to such demands?

DK: Rohlik.cz, for instance, negotiated possible expansion in Prague with us even before the outbreak of the pandemic, and therefore had a huge advantage in securing premises in the eastern part of Prague in time, which suitably complement the original distribution centre at Liboc in the western part of the metropolis. Thanks to this, they managed to cover the extreme increase in orders during the pandemic. But the decisive factor was the location of the park in Horní Počernice, which is ideal for urban logistics.

TK: However, not every hall is suitable for fast-moving goods and especially for food. These clients have specific requirements for warehouse operations, where supplies are usually provided by lorries, which require several large loading ramps. At the same time, however, such an operation also needs smaller ramps and then designated areas for picking up prepared goods and loading supplies, which afterwards are distributed to customers. Not to mention other necessities, such as suitable lighting, ventilation and heating system, especially in the context of refrigerated and frozen goods. Such an object must then function as a supermarket, but it provides a much wider and more varied offer. However, these ‘optimal’ conditions do not represent a development standard, and although the hall can be retrofitted to such operation, it entails considerable costs. In the long run, it is far more advantageous and sustainable to have the hall built-to-suit so that it fully meets all the requirements of the tenant. The built-to-suit construction is then approved for specific operation which significantly speeds up the administrative side of the entire construction.

Can we anticipate a greater rate of construction of new projects near large towns?

DK: Not only e-commerce demands industrial space near or directly within large towns. Land plots for construction on a green field are practically unavailable in towns, which is why brownfields are increasingly being used for new projects. This is the case of the planned P3 Ostrava Park, although we perceive it more as the construction of a new business district, which will connect smoothly to its surroundings and consist of production and storage halls, shops, showrooms, offices and other facilities typical of urban development.

So how will the Ostrava project differ from other development projects?

TK: We cooperated on the design of the project with local architect David Kotek, who follows the urbanism that the architect Josef Pleskot bestowed during the revitalization of the DOV complex and also consulted it with the Municipal Studio of Spatial Planning and Architecture (MAPPA). We will integrate our project into the industrial area and at the same time want to incorporate various sustainable solutions with a positive impact on the environment and on the efficiency of the operation of the complex and individual buildings. Whether it is about facades overgrown with greenery, rainwater management in the form of underground retention basins, utilization of a local heat source and process water, or an effective combination of natural and artificial lighting, we have the ambition to move the level of industrial buildings higher. In addition to being an exceptional investment value of several billion crowns, it is the first brownfield in the Czech Republic that P3 will use to such an extent. The region has a rich industrial tradition which we naturally want to build on and bring new job opportunities with higher added value to Ostrava.

Ostrava is a historically industrial town – do you think there are enough suitable industrial premises in the Czech Republic in general?

DK: P3 Ostrava is exceptional because we offer over 150,000 sq m of space for urban logistics, retail and e-commerce as well as for light production or R&D right in the wider city centre. The location in the city centre will delight traders or logistics, who provide facilities for them. Future clients will benefit from the excellent availability of a skilled workforce. The same applies to our P3 Lovosice park in the Ústí nad Labem region, where we can offer construction of halls according to a client’s requirements with a total area of almost 30,000 sq m. Lovosice is also interesting for tenants due to its location – 40 minutes from Prague and 60 minutes to Dresden.

Is it true that logistics halls situated by motorways to and from Germany practically rent themselves?

DK: It is not that rosy, but good accessibility to Germany is, of course, a strong argument for clients with orientation towards the German market who are looking for premises that can be provided in a relatively short time.

TK: In Lovosice, we have a total of three buildings with building permits already issued, so we can begin construction almost immediately. We are also trying to achieve this position in another park, which we are preparing at Myslinka near Plzeň. It is located about 15 km from the city centre – and on the other hand it is just a few minutes from the park to the D5 motorway, which is not only a very convenient location for the manufacturing industry.

DK: The Plzeň industrial real estate market is the third most important market in our country after Prague and Ostrava, and there is considerable interest in spaces in a park connected to the motorway and suburban public transport. There we are able to offer units from 3,000 to 30,000 sq m. We are starting to build the first halls this year and it will be possible to move in at the turn of the year.

Do you count on a ‘green’ solution for built-to-suit construction?

TK: We build all new P3 buildings to achieve the internationally recognized BREEAM certification at the Very Good level, which emphasizes the sustainability of the buildings. But we are currently preparing some parks, such as P3 Lovosice, for a higher standard, BREEAM Excellent. We place great emphasis on ensuring that solutions required by the certification are primarily meaningful for the operation of the complex or the tenant himself. In Lovosice, we have installed a number of technical solutions for maintaining water in the given locality, such as retention and infiltration tanks or a specially designed layer under the parking area, which prevents possible seepage of pollution into groundwater. In this respect, Lovosice is a regional showcase of green solutions in the area of water management. We are preparing a similar project, in which we will demonstrate the best of the portfolio of ecological solutions, in the P3 Prague D11 park or in the P3 Olomouc complex. There we will show how modern sustainable development can look like, and we believe that some tenants can be inspired there.

However, it is not always possible to meet these key parameters, such as a large city or proximity to Germany. What options do tenants then have?

DK: The fact is that there is not much land suitable for industrial construction in large towns. In Prague, such plots are practically unavailable. We must therefore look at the whole matter from the point of view of industrial or logistics operations. Traveling 30 km is unimaginable for many of us, but it is a good compromise of acceptable driving distance and availability of employees for logistics companies. It is Prague, as an economic centre, that is particularly suffering from the lack of vacant land for construction. One of the last opportunities for the construction of a built-to-suit hall is the P3 Prague D6 park in Stochov, Central Bohemia, where there are 17,000 sq m available, but the size of the units can be flexibly adapted. The name of the park suggests that it is conveniently accessible from Prague and at the same time is connected to the D6 motorway, so it is also attractive for export companies.

What are your recommendations to the potential or existing tenants of your premises?

TK: The design and construction of a good industrial property built-to-suit is not a sprint, but a steady run. Primarily, the permitting processes need to be planned several years in advance.  It is then ideal to use this time for a detailed design of the operation for a particular client so that it best meets his needs and is flexible enough for the future. The reward for foresight and effort will arrive in the form of a wonderful building, which we and the tenants will be proud of.

DK: Do not be afraid to let the developer look under the imaginary cover of your business when planning the hall. It is very likely that operational or other issues that you may be solving at the moment, have already been dealt with, or even completely solved, for one of the other tenants. In addition to construction and leasing, we have our own expert teams for asset, property and facility management, so we can advise clients not only on planning and construction, but also on building management or setting up operations inside. Ideally, we will all meet around the same table, the client will tell us his requirements and we will then evaluate what can or cannot be built and whether it even makes economic sense at all.

PR