You have almost twenty years in the logistics sector under your belt. How have things changed over that time, with all its twists and turns and crises such as COVID-19? The pandemic especially seems to have been a turning point in the sector, prompting an explosion in online retail.

In my years in the industry, I’ve watched it evolve through different cycles, gradually becoming more professionalised thanks to growing interest from core and institutional capital. This has drawn more actors, users, managers and developers to the sector, pushing down yields to unprecedented levels — below 4%.

 

The logistics sector is a reflection of what is happening in society and how retailers are responding. The pandemic was a watershed, driving e-commerce and impressing on everyone the importance of supply chain efficiency.

 

Companies no longer see logistics as just another line on the expense account, but as an opportunity for a genuine competitive advantage. Resilience became paramount, as shown by cases like the Ever Given and the attacks around the Cape of Good Hope. 

Despite a more sluggish economy in recent years, logistics has proven itself a safe haven thanks to its countercyclical nature. What makes it so popular with investors, and why do they continue to bet on the sector?

Logistics is a balancing force in the economy. It is a necessary step in the journey, where finished goods are stored and distributed. Supply chains have had to adapt to the coexistence of traditional B2B and B2C channels, with a shift towards omnichannel retailing.

And there is reason to expect even higher demand for logistics space going forward. Users are looking for flexible, modern facilities that meet stringent sustainability standards, modernised and retrofitted with all of the latest technology. They need spaces that make sense in the age of e-commerce, particularly last-mile distribution.
And they need plenty of built-in resilience to cope with the inevitable stream of curveballs and disruptions. As for new developments, land is short and costs are high, putting a dampener on rental growth. This is constricting returns, despite high inflation and all the upheaval of 2023.  

Right now, the sector faces multiple operational challenges as it adapts to new consumption patterns and the need for decarbonisation. How is Prologis confronting this scenario? Compounded, of course, by the impact of digitalisation on the sector and a challenging recruitment climate.

At Prologis, sustainability is at the heart of what we do. Our Net Zero 2040 campaign is designed to get us to a zero-emissions supply chain by that date. We invest in disused properties and bring them up to modern standards based on circular economy principles.

In terms of talent recruitment, we want to do more to publicise the logistics industry. As a company, we’re making the case for public-private partnerships through initiatives like Logistics Training in Motion (LTIM), which we developed in collaboration with Universitat de Barcelona and Sant Boi de Llobregat City Council. This is a programme of microcredits awarded by the university, with courses adapted to current business needs. The next intake is in September, and we will be focusing more intensively on networking opportunities.

It is vital that the logistics sector makes the transition to a greener, more sustainable model. But how do we reconcile profit and planet? In other words, what impact might ESG factors have on logistics asset values?

The way we approach sustainability at Prologis is as an investment that creates value for all. Every investment in sustainability is viewed as an opportunity to generate a substantial return. At the same time, we want to help our clients reach their own sustainability goals by fronting the capital for renewable energy projects or investments in energy performance.

Valuation professionals are playing catch-up; they need to deepen their knowledge of ESG issues, so they can think more systematically about how to account for ESG standards when putting a figure on a property. By now it seems obvious that strong ESG credentials will enhance a property’s value.

Continuing on the theme of sustainability, has the market fully taken on board the importance of a greener development model? What makes your properties more sustainable, and what initiatives are you working on at the moment?

We are all increasingly aware that there is no Planet B. Every industry needs to get behind a more sustainable approach to business. Sustainable construction in general is more mainstream, but we need to focus more on what really moves the needle. Regulators, banks and users are all pushing the industry to decarbonise and embrace the necessary energy transition. The logistics sector is one of the most advanced in this respect, and it has the potential to make an enormous impact.

Our platforms offer clear specifications such as adjustable LED lighting, circular architecture and lower embodied carbon. We also aim to integrate renewable energy sources and options for sustainable mobility.

We recently announced an agreement with ACCIONA Energy to create community solar projects around several of our properties in Spain. These projects will ultimately supply all of the energy needs of our logistics parks and of local homes and businesses.

Finally, Prologis subscribes to the PARKlife™ philosophy, which helps us promote a sense of community among users and build connections and synergies between parks and the cities beyond their gates.

There has also been a lot of discussion about automation in logistics platforms and workflows. What impacts do you expect to see from the advent of new technologies such as AI? Will platforms that don’t buy into the AI revolution eventually get left behind?

In the logistics sector, we’re seeing disruption on all fronts. The industry is in the midst of a massive technological transition. More automation in warehouses will streamline the workflow from door to door. There are other advantages too, including an improved level of safety at work, with fewer accidents.  These tools can also help us keep closer tabs on stock, monitor the efficiency and accuracy of order preparation and make better use of space. Automation is a gamechanger for productivity, and it is important to remember that automated processes require qualified staff and so can actually create more jobs.  It is critical that all actors in the supply chain make use of these tools — adoption at the individual level will send benefits rippling across the chain.

In light of everything we’ve talked about, and acknowledging that a new challenge is always just around the corner, how do you envision the future for Prologis? Will you need to expand into other, more mature markets to stay on top of new advances in the sector?

At Prologis we have two mantras: “Ahead of what’s next” and “Why not today?” They inspire us to imagine the future and take action to initiate change. I’m optimistic about the future; we have a long way to go to modernise the logistics stock and deal with challenges around energy, mobility, sustainability and social impact.

Since Prologis was founded 40 years ago, we have built the world’s largest logistics platform, designed to a level of quality that would be hard to match.

We have great ambitions for our future growth, concentrating on optimising our portfolio through an asset management approach based on AI analytics. Our international scale allows us to share information on markets and clients, so we can act swiftly at the global level.