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Real estate on the move

Convenience. E-commerce. Logistics. Real estate. Words that at first glance bear little relation to each other. Mention this to Peter Lehmann, CEO of Swiss Prime Site Immobilien, and he starts to discuss it with great enthusiasm. It’s all about consumer habits, customer expectations, economic growth, traffic volumes and big potential for his employer.

The real estate market is constantly changing and so is the company over which Lehmann presides: Swiss Prime Site Immobilien. He and his staff always have their finger on the pulse of the economic situation and maintain a constant dialogue with their customers. For them, it is essential to continue to develop the portfolio, which is worth approximately CHF 11 billion and includes more than 190 facilities, and implement any new requirements or expectations. Currently, pure logistics real estate or buildings with high logistical standards are in demand. In previous discussions of these types of properties, people always imagined rural areas and distribution centres on greenfield sites, with dozens of trucks arriving every day. This has changed fundamentally over the past few years. «Logistics providers now want and need to be located closer to or in a town or city, so that they are able to keep their transport commitments to their customers,» says Lehmann.

This is due mainly to one reason: online business! The widespread use of the ubiquitous smartphone has changed consumer habits in general. Online ordering, products delivered to your doorstep and payment by credit card have all become so normal in 2018 that it’s hard to imagine a world without these facilities. And from the consumer’s point of view, they don’t want to. According to a study carried out by Credit Suisse, the number of packages transported in Switzerland has increased by more than 60% since 2015 and is set to continue to grow at a similar rate. Consumer expectations are also growing at the same pace. «Where previously people were happy to order something online at the beginning of the week and receive it on Friday, these days customers have very different requirements,» says Lehmann. Today, we expect the goods to be delivered to our door within 48 hours at the latest. In fact, 24 hours is already considered to be the norm. «In future, we will order in the morning and want the purchase to be at our home or a collection point in the afternoon,» he explains. But why is the CEO of Swiss Prime Site Immobilien concerning himself with e-commerce and retail in its broadest sense?

Digitalisation and thus online trading have a big influence on the flow of goods and distribution. Cost efficiency and time savings also play a significant role. This increases the demand of the logistics industry for central locations and buildings that are specifically tailored to meet their requirements. Swiss Prime Site Immobilien recognised this correlation at an early stage and has invested in projects in recent years that correspond to the industry. Lehmann explains how this became the focus of the real estate developer: «Our strategy has been, and remains, to orientate our portfolio strongly to prime locations. Ten years ago, logistics centres were still located far away from cities, but today they can sometimes be found on the outskirts or in urban areas. After all, the local distribution – the last mile – of goods is the key to success for many logistics companies. We help them with this by providing customised properties and an increasing number of central sites.»

Today, Swiss Prime Site Immobilien accounts for 5% of its portfolio as «warehousing» or logistics space. According to Lehmann, this proportion will increase further in the coming years. The real estate developer currently has two projects in the pipeline in this area. In Geneva, the «Espace Tourbillon» development, consisting of five buildings for commercial and industrial use, has been under construction since 2017, at a cost of several hundred million francs. The properties are linked by an integrated underground logistics terminal to ensure easy delivery of components and despatch of finished goods. Geneva city centre is just 20 minutes away. Another similar project is «West-Log» in Zurich-Altstetten, for which the foundation stone was laid in mid-October 2018. Here, a property is being constructed in the immediate vicinity of Zurich-Altstetten railway station and close to the motorway. This site with optimal transport links will enable the anchor tenant, «Elektro-Material» to distribute its goods quickly and cost-effectively within the city of Zurich.

Lehmann believes that Swiss Prime Site Immobilien will establish more projects like this in the future. He even goes a step further and says: «The demand for logistics real estate will not stop at the city boundaries. We will soon experience the next stage of this and see expensive inner-city locations becoming profitable spaces for distributors. Increasing volumes of traffic are likely to result in the overall stagnation of home deliveries of goods ordered online. Smaller collection points in city centres will become more important and ground floor space – currently, typical retail areas – will be in heavy demand.» But Swiss Prime Site Immobilien seems to be well equipped to deal with this. Addressing this specifically, Lehmann explains: «Our organisation is structured in such a way that we manage our stock and our projects very closely with the market and our customers. This means we can react quickly and easily to requirements and implement solutions for our customers.» Looking back at the company’s impressive history, there is every reason to believe him.

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