As a consequence of the coronavirus pandemic, the year was marked by major changes in purchasing habits that drove e-commerce to record heights in Europe, which in turn promoted increased stockpiling in order to strengthen sensitive supply chains. The increased demand has driven valuations to new levels, of which the deal with Blackstone is one example.
The strongest underlying factor driving logistics market performance in 2020 was the continuing shift from retail space to storage space. The pandemic accelerated this process, and the structural changes have been deemed to be constant over time.
E-commerce reached record high levels
Over the last several years, the logistics market has experienced record high levels. One of the foremost drivers is the robust growth in e-commerce, which as a result of restrictions in conjunction with the pandemic has experienced very strong development. Growth in Swedish e-commerce in 2020 was estimated to be approximately 33% (16).
The establishment of Amazon in Eskilstuna during the autumn was deemed to have a positive impact on online shopping. It is too early, however, to assess the consequences for the Nordic logistics market. The effects of Amazon’s entry into other markets indicates a favourable impact on e-commerce, price pressure in specific segments and greater challenges for physical retail.
Increased e-commerce has also result in increased growth among distribution companies, primarily operators active in the “last mile” segment. For Castellum, this means expanded possibilities in the form of letting terminals and warehouses in locations close to cities.
Increased demand for logistics properties
During the first months of the year, Castellum experienced a high level of demand for shorter leases. Production shut-downs in southern Europe resulted in production stoppages in the Nordic region and the need for short-term management of cargo that could not be delivered to end recipients. By acting quickly, letting opportunities were created at locations such as Castellum Säve, where Castellum could offer opportunities for storage and disposition of cargo for companies with immediate needs.
Logistics Establishment of the Year for 2020
In Sweden, new production of logistics facilities during the year corresponded to an area of 55,000 square metres (Intelligent Logistics). The projects were constructed primarily in the traditional locations, centred on Skåne and Gothenburg. The trend in establishing warehouses in close proximity to consumer centres continues, as does consolidation of warehouses, often in combination with an increased degree of automation.
New production increased during the year, and Castellum’s projects included a 36,000-square metre logistics building for Jollyroom in Gothenburg. The building was nominated as the Logistics Establishment of the Year for 2020 due to its capacity for promoting increased efficiency for the tenant, a focus on sustainability through solar cell installations on the roof and a focus on the wellness of personnel with, for example, a gym for personnel and well-thought out spaces for personnel.
Sale demonstrates values
At the end of the year, Castellum signed an agreement with Blackstone that involved the sale, in an initial tranche, of a mixed portfolio with mostly mature, stabilised logistics properties for SEK 5 billion. The price level exceeded the value as at 30 September 2020 by 20%, thereby realising the value that had previously not been visible. At the same time, the most interesting parts of the logistics portfolio that can be developed have been retained: Hisingen Logistics Park, Castellum Säve, and Brunna, located north of Stockholm, as well as important holdings in southern Sweden.
The value of the remaining property management portfolio in the logistics segment remains considerable, and there is potential to build more than 1 million square metres of modern logistics space on the land bank held. The investment plan for the years ahead is more than SEK 10 billion.
The sale provides opportunities for investing even more in modern, flexible logistics properties that the market demands.
Castellum is well equipped to meet continued strong demand for logistics properties. The focus is on strengthening and consolidating our position as a leading property company for logistics properties in the Nordic region.