“The real estate market is currently facing a challenging period”
With a presence in the U.S., Canada, Asia, and Europe, Panattoni Europe is one of the major global developers in the industrial real estate sector. For the past three years, the company has been operating in the Iberian Peninsula, aiming to become a key player in the market. We spoke with Gustavo Cardozo, General Manager for Panattoni Spain and Portugal, about the company and the industry’s response to the rise of online commerce. We also analyzed the challenges of sustaining growth in the industrial real estate sector.
Panattoni has established itself as the largest industrial real estate developer in Europe, but it’s been only a few years since you entered the Spanish market. What is the current state of the Spanish market?
The performance of the Spanish market has exceeded our initial expectations. Fortunately, demand has grown for various reasons since our arrival on the Iberian Peninsula. Thanks to the trust placed in us by our European headquarters, investors, and clients, we have quickly become one of the most active developers in the region. Despite the current economic uncertainty, the demand shows positive prospects in the short to medium term. Compared to neighboring countries, Spain holds a strategic position and offers advantages such as a strong attraction for industrial activities, especially in the automotive sector, the potential growth of e-commerce, and the country’s energy autonomy compared to other European markets. All these factors continue to attract more demand to the sector.
You have developed over 20 million square meters of logistics space in Europe. What values have characterized your company in these almost 20 years?
We have an international vision with a local focus, meaning that we possess a deep understanding of the global market while developing a local network of relationships. This enables us not only to locate ourselves in strategic areas but also to have a positive impact on the environment and the communities where Panattoni integrates.
Flexibility is another key aspect. Our private corporate structure allows for agile and rapid governance and decision-making processes. Local decisions are made locally, with the support of our headquarters. This is what primarily gives us the agility and speed we mentioned. All of this is always approached from a sustainability perspective. Our goal has always been to have a positive long-term impact and contribute to the development of a greener and more environmentally friendly future.
The combination of these three elements, along with constant innovation and technological integration, has been the fundamental basis for our business development and has characterized us over the years.
“The rise of e-commerce has led to increased investment in logistics buildings.”
How has the growth of e-commerce in recent years contributed to the development of the sector?
The e-commerce sector has been a fundamental pillar for industry development. In recent years, e-commerce has experienced exponential growth driven by technological advancements, changes in consumer behavior, and market globalization. This evolution has transformed the dynamics of the real estate sector, increasing the demand for strategically located logistics spaces and distribution centers to meet the storage and shipping needs of products. The rise of e-commerce has led to increased investment in logistics buildings, reshaping how real estate properties are planned and developed to adapt to the changing needs of the supply chain and fast delivery. In fact, in 2022 alone, the retail sector absorbed 43% of the leased space.
Sustainability is an important part of your value proposition. Have ESG criteria become a permanent part of real estate?
Indeed, and the market reflects this. In recent years, there has been a significant increase in awareness of sustainability and corporate responsibility in all industries, including real estate. Investors, tenants, and society as a whole are increasingly concerned about the environmental and social impact of properties and real estate projects. This trend is influencing investment decision-making, property design and construction, as well as the management and operation of real estate assets.
Sustainability and efficiency throughout the supply chain respond to criteria beyond business, making it a “must” for everyone involved. Therefore, at Panattoni, we address sustainable development broadly, positively impacting both our external and internal customers. Our decisions are always made considering three factors: environment, society, and corporate governance, each of them crucial for our partners. International guidelines and regulations worldwide on sustainable investments have helped us select Sustainable Development Goals and align with EU objectives. We already have over 5.7 million square meters of certified clean space.
These have been excellent years for industrial real estate. How do you see the future?
In the current situation, the national landscape experiences a certain ambiguity, and regarding future prospects, there is a sense of cautious optimism. While positive dynamics could persist, some challenges are visible as various factors converge, causing a slowdown in the market and instilling greater caution in investment interest.
Despite this, it is worth highlighting that the need for space by logistics players remains active, especially in consolidated areas, and sustainability and ESG criteria are expected to continue influencing the planning and development of properties, reflecting a growing environmental and social awareness.
However, it is important to consider potential economic volatility and regulatory changes that could impact the market. The balance between supply and demand, along with macroeconomic conditions, will play a crucial role in determining future dynamics. Ultimately, although continuous growth is anticipated, addressing emerging challenges with agility and adaptive strategies is essential to keep the industrial real estate sector on a positive trajectory in the coming years.
“Decisions are always made considering three factors: environment, society, and corporate governance.”
Alternative assets have a promising outlook in real estate. In fact, you have recently finalized the purchase to develop a data center in Catalonia. Will investment continue to grow in the coming years?
Investment appears to be steady. At Panattoni, in recent years, we have focused on diversification both in markets outside the Madrid-Barcelona axis and in new business strategies and industrial real estate products.
The development of a data center shares many similarities with that of a temperature-controlled or cold storage logistics facility, although there are, of course, some notable differences. However, with our experienced and multidisciplinary technical team and the support of appropriate advisors, we are fully equipped to take on this responsibility with confidence and ensure success, whether in the field of data storage or goods.
Lastly, in general terms, how do you perceive the current state of the real estate market?
In general terms, the real estate market is in a challenging period due to factors such as rising interest rates and increased production costs. Despite these challenging situations, the market has shown a certain resilience, largely thanks to active demand. This has allowed us to continue investing and maintain a high level of confidence in the sector. As long as the desired balance between supply and demand exists, something we foresee continuing in the short term, there is no reason for alarm.
In recent years, Spain has been establishing a stable growth pace. We expect to further strengthen our position in the country and have a footprint as relevant as in other markets where the company has been present for a longer time.
However, we are attentive to all international events that are unfolding and their potential impact on the economy and the level of confidence among clients and investors, enabling us to anticipate conditions that may arise in the market appropriately.