The acceleration of the transition from traditional to online retail will lead to sustained demand for class A storage spaces in locations that can ensure reliable delivery in a shorter time span. “We estimate a growing demand for warehouses closer to the city, or even in the city. Therefore, we are now working to diversify our portfolio by purchasing or developing smaller warehouses within the city to serve this type of demand”, Muller Onofrei, CEO & Co-Founder, Element Industrial.
What type of adaptive measures the company / your project(s) needed? What were the lessons of this period?
As developers, continuity has aspects related to existing tenants in already finished buildings as well as concerns related to on-going works on construction sites. We took a number of measures to ensure business as usual (or as close to normality as possible) for existing tenants and we worked closely with our general contractor in designing site specific measures that allow construction to go on unhindered. The key take-away from this public health crisis is that developers need to take an active role in planning for black swans. It is a logical contradiction indeed to plan for a black swan but systems need to be put in place that allow flexibility in development. For example, small batches versus massive speculative buildings is one of them. If one should prepare for the unexpected, it is important not to launch big construction projects, but smaller (and more often started) incremental building projects.
What is the status of your current project(s) and investments planned for 2020-2021?
ELI PARK 1 is the first logistics park in the portfolio of Element Industrial, totaling 50,000 sqm GLA. The first phase of 20,000 sqm was delivered last summer and leased to Arctic, while the second phase with an area of 30,000 sqm is being delivered during this period, some of the tenants of these warehouses being Paste Băneasa or Dentotal. We currently have secured several locations for further developments both in Bucharest and in cities such as Craiova, Bacau, Targoviste or Timisoara. We are currently focusing on authorizing and developing these projects.
Which are the advantages of your business and products, going forward? What are your expectations from the public sector, state projects to support future business?
As a smaller player we have the advantage of flexibility and we enjoy a better adaptability to market demands. In Bucharest, we have developed a new logistic hub, in Chitila – Buftea, with an easier access to the North of the Capital City. The acceleration of the transition from traditional to online retail will lead to sustained demand for class A storage spaces in locations that can ensure reliable delivery in a shorter time span. We estimate a growing demand for warehouses closer to the city, or even in the city. Therefore, we are now working to diversify our portfolio by purchasing or developing smaller warehouses within the city to serve this type of demand. As far as the public sector is concerned, we consider that the best investment is in new infrastructure projects which will generate, on a long-term, new private investments, with obvious positive effects in the entire economy. We have three suggestions for the state- infrastructure, infrastructure, infrastructure.
What transformations you expect in your sector, their effects for the Romanian economy and in a regional perspective?
It is obvious for all of us that there are (and will be) transformational effects of this crisis. One of them is of course the rethinking of the global flows of goods. There are important questions to be answered that would define global trade for years to come. Will China suffer from a reluctance by western economies to further depend on critical imports from the region? Would this all be forgotten rather fast? Will the European Union play a strengthened economic role or will it subside in importance? There are many moving pieces now. We should be sure that Romania will remain a cost-effective country for Europe to invest in. We are at the sweet spot where safety and reliability meet reasonable costs and decent regulations. I think Romanian authorities will finally realize that infrastructure projects (rail, road, waterways, energy) that connect us to the west of the continent are the most important investments that can be made, with the strongest multiplying effect. As a second important point, from a technology disruption perspective, Romania has many arguments in its favor. It is one of the leapfrogging effects that will play out in the following years. These meta trends will be accelerated and enhanced by a foreseeable migration of production facilities and trade flows from Asia to Europe. In short, Romania is not in a bad position, and the logistics and industrial real estate sector is set to benefit long term.
What is your message to clients and partners?
We are positioning ourselves to be able to act swiftly in order to satisfy market demand and to take advantage of the opportunities when the economy will turn. While it is not business as usual, we would like to assure our friends and partners that we are a reliable long term companion that is highly adaptable to all weather conditions.
An article published in the exclusive supplement – “Market pulse report, Romania – The new normal” | June 2020
A property market tour, including major cities, with projects status and updated opportunities at the end of the lockdown in Romania – June 2020. | Essential news with the current status of further investments, clients and partners relations, new priorities for the post crisis cycle. | B2B communication report – to help you mark your statements during the changes period.
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