Bert Hesselink, Group Business Development Director at CTP, talks about how he sees future developments and trends in the commercial real estate market, but also about his motivation, hopes and visions for collaboration between developers, investors and local communities.
We are at the beginning of the new year – what are the prospects for the commercial property market in 2020?
In short, I can say that we do not expect any significant changes this year. Naturally, there are some concerns about the commercial war, Brexit or electromobility in the automotive industry, but this is very similar to last year. I personally record the same number of client requests for commercial premises as last year. Our company operates in 7 countries across Europe and in general interest is very stable. There are slight changes, for example, the concentration of demand is slowly shifting eastwards.
What causes this shift?
Most often availability of labor. Manufacturers who do not play such a large part in the location of the production site and the speed of delivery of the product to customers are looking to the east, where labor is still available at a reasonable price.
What does “exit” mean in this case?
For example, Serbia, eastern Slovakia and Poland, but also the east of the Czech Republic. Moravia had a very strong year 2019: a number of companies rented warehouse space there for logistics and production last year, while in the western part of the Czech Republic there was a slight decline in demand compared to the situation 2-3 years ago when this region was booming. The main reason is the growing concern about the lack of workers. This problem is being felt today by customers across Europe.
Which regions should producers focus on then?
Just this morning, I was discussing the exact same issue with the head of advice on the selection of CBRE locations in Europe to find out where to buy land in the near future. The increasing difficulty in finding workers and moving east was one of the topics of our discussion. But more interesting was the tip that we should also focus on poorer areas of rich countries, such as the north of France, regions with higher unemployment rates in Belgium or the UK. This is where companies are increasingly looking around to find a place for their factories.
Basically, we can say that it is the same in logistics. People often think that logistics centers must be as close to the end customer as possible. This is true for e-commerce, but not all companies. Individual tenants have very different demands on their supply chain. That is why we are active in all regions and offer different types of buildings. We cannot throw all companies in one bag, the market is very diverse.
Are the new generations of employees and their different ideas about working conditions affected the design of your buildings?
I am not an expert in this field, but I notice that people – and therefore not only the youngest generation – generally want more flexibility. Employers are then forced to create a more attractive work environment for their workers; mainly because employees want to choose where to work. This trend is slowly starting to show up in warehouses as well, because there are many people working in offices. Today, you can work anywhere, anytime, on any device, thanks to technology. This means not only from home, but also from anywhere in your office. This reduces the number of “personal” workbenches and, on the contrary, expands common areas where people can meet and work.
How are tenants’ requirements changing today? For example, do you see a greater interest in environmental protection measures?
Yes, but I have to admit that the change is slower than I wish. CTP is a construction investor. This means that we want to build buildings that will be interested in 10 to 20 years. That’s why we decided to certify all of our 293 buildings in six countries under the BREEAM In-Use International program. CTP wants to achieve this by June 2020. We strive to educate tenants in areas such as sustainability and energy efficiency. At the same time, we invest money in the construction of high-quality premises that are more energy efficient, better insulated, etc. And for that we naturally demand higher rent. To be honest, selling this concept is not easy. Most companies have a plan for environmental and social responsibility, but at the end of the day they focus mainly on their quarterly financial results. We, on the other hand, look ten to twenty years ahead, which is not very well-stacked. But lately, there has been an increased interest among tenants in solar energy and green energy sources as such. And that is very good news.
What about another popular trend – digitization?
Yes, of course there is interest. The initiative most often comes from our side. We try to be one step ahead and know what the tenants will want in the future and come up with new ideas. And our tenants usually accept them enthusiastically. For example, we have included a building management system in the standard technical specifications of our buildings that allows tenants to monitor energy consumption and detect vulnerabilities. This will save you a lot of money. We make buildings smarter, raise standards and the tenant can, of course, decide to go further. Have more control, connect your own devices, have access to the building management system in real time. Technology is moving very fast, everything revolves around data and its optimal use and interconnection of all devices and systems.
Does this also apply to building security?
Safety is extremely important for tenants. Here, too, the technology is continually improving and the security features are developed and assembled so that they can be easily connected to other equipment and appliances in the building. This is standard today.
You have been on the market for 18 years, what is interesting about your work and what motivates you most?
As a boy, I was always interested in the idea that I could influence how the world looks and behaves around us. That’s just a wonderful idea. In a nutshell I can say that in our company we do much more than just build buildings. We create spaces, influence the environment that surrounds us. I always liked geography, later I studied human and economic geography, and then it was time to choose a specialization. I chose real estate, although I knew nothing about it at the time. But I was fascinated by one thing: if you place a building somewhere, it affects life in that location – it changes its dynamics, the movement of people, attracts schools, universities and companies. Real estate has a huge impact on geography. That’s why I’m so interested. And that’s why CTP does what it does: because it has such an amazing impact!
Your buildings also have an impact on the landscape, which is not always perceived positively by the public. Can it change?
Looking into the past, we can see that the internal and external appearance of buildings is definitely changing. The truth is that warehouses and factories are simply not very beautiful from the outside to look at. But we like to get involved in the public debate. I would say that we are now in a stage of improving the interior of the buildings in which people work. However, I am not sure that we are already improving the landscape. The box suddenly appears in the meadow. We still have to work on that. On the other hand, I feel that the public debate is often too negative, especially in the Czech Republic. I grew up in the Netherlands, where all the children in the school “brainwash” and teach them that business and logistics are great because they give us a job. Holland is a country of merchants, a flat landscape full of bicycles, fields and gray clouds. Think of it as kind of a joke and my personal opinion, but I think in the Netherlands it’s always better to pedal between buildings than in a bare field – at least to avoid wind gusts.
And what is your experience in the Czech Republic?
In the Czech Republic it is different, you have a beautiful hilly landscape and one day will begin to build a warehouse. And it’s usually gray, which doesn’t add much to the landscape. Still, I think it brings a number of benefits and improvements to people who work inside. CTP has already built 5 million square meters, of which more than 3.5 million in the country, which directly affected 70 thousand people. We have improved their working environment. In addition, by offering investors coming to the Czech Republic an attractive pro-story, the Czech Republic can attract more interesting projects. When investors choose between the Czech Republic and Poland, for example, and see that they have a modern commercial zone at their disposal and we are able to deliver it on time, on budget and in good quality, they opt for that country. This will create jobs for people who previously worked in old, neglected areas.
But of course I understand that not everyone perceives the exterior of new buildings positively. As I said, we must focus on this in the future.
Can the commercial zone become part of the local community?
That is exactly what we want: we are a developer – investor and not a developer – trader. We keep the buildings built and think in the long run. We are very interested in building good relations with local government, it helps their region and at the same time it gives us a competitive advantage in relation to investors. Every place has its own story. If you decide to invest here, it will become your story. It’s great to be part of it. However, I must say that today, compared to the past, when unemployment was much higher, the interest of individual cities in attracting investors has diminished.
Is the interest in specific types of investors changing in municipalities?
Your government has a vision that it would like to attract investors that bring more added value, focus on research, development and innovation. You no longer want to be Europe’s montage. Such a change is not easy at all. The government wants to make a quick leap, which I think is hardly possible. It is sometimes frustrating for us and for those interested in investing in this country. Some will learn that they should not invest here because they do not meet your expectations. The problem is that if they opt for another location and later start attractive production with higher added value, they will not return to the Czech Republic. You will lose them forever. The next question is what will happen to the people who work in the assembly plants today. They are not ready to start doing research and development. We can all build a great future for the Czech Republic, but the change must be a gradual process.
What is most important to your work?
All questions and answers have always brought us to the people. There is much talk about technology today, but it only works if people support it. That is why we focus on building communities and making life easier for people. And we are successful because we have the right people in the team.
And is it difficult to find such people in the Czech Republic?
We don’t have a big problem finding the right people because we are an interesting employer. If you study architecture or civil engineering and then find a job with a company that builds the buildings you learned, it’s great. The ability to find the right people is whether you have something to offer as an employer. If you can attract them. If your offer is appealing, you won’t have trouble.