Warehousing as a service

‘Eurobuild CEE’: Last year, a Prologis warehouse in the Netherlands, namely in Tilburg, east of Bremen, became the first industrial building in the world to receive a Well certificate with a ‘Gold’ rating. This was awarded for such health and wellness features as walking routes, fitness facilities, common dining areas and indoor greenery to enhance the air quality and employees’ connection with nature. How did such an unusual warehouse project come about?

Paweł Sapek, Central Europe regional head and senior vice-president, Prologis: Today, it is becoming increasingly clear that a warehouse should not just be another steel box in which employee retention depends solely on their hourly wages. This means creating a healthy and pleasant working environment for those who work there. By doing so, our customers can improve the wellbeing of their employees, which leads to higher motivation and productivity. By adopting a human-centric approach and creating a pleasant and healthy work environment, we have provided our customer Pantos Logistics with unique added value that takes into account the company’s employees – its most important resource. The Tilburg facility was developed in cooperation with the International Well Building Institute to adapt and adopt Well standards for logistics real estate. What is really interesting about the project is that authorised Well assessors spent three days onsite evaluating the building while the facility was in full operation. This stringent performance-based assessment is what makes the IWBI certification a genuine seal of quality that signifies a visible commitment to supporting the health of individuals in the space.

Last year, Prologis also completed the construction of a facility for L’Oréal near Karlsruhe in Germany. It’s a carbon neutral building.

This was another flagship build-to-suit project for L’Oréal that required exceptionally close cooperation with the customer to complete. The design stage took longer than its actual development and a number of German academics participated in drawing up the concept. This carbon-neutral facility offers around 101,000 sqm of logistics space. In order to make the operations there carbon neutral, the overall difference between emissions and carbon offsets must equal zero. To achieve this, we have equipped the facility with reinforced insulation and a 2 MW peak photovoltaic system, among other features, such as using renewable energy generated from wind turbines. Rainwater is being used to irrigate the green spaces surrounding the facility as well as to clean the halls. Furthermore, 120 pct of the facility’s emissions are neutralised through renewable energy procurement as well as a solar installation that acts as a buffer against future changes in energy use.

But impressive buildings such as these in the Netherlands or Germany have yet to be built in Poland.

There have not been any such projects yet, but we are moving in that direction. Last year, we were talking to one particular customer who was considering not just attaining the usual environmental certification for their facility, but developing a project that would qualify for a Well certificate, which is awarded to projects that guarantee a healthful and positive working environment for employees. We have also carried out projects in Poland, where the customer has made great efforts to ensure there was no difference in the quality of the working environment between the office and social space on the one hand, and the warehouse area on the other. In this way, all the employees are treated equally. A good example of this approach is the unique wellbeing zone that is under construction for Euro-Net at Prologis Park Janki. It is situated on a 1 ha plot where many conifers, deciduous trees, fruit trees, shrubs and honey plants have been planted, along with the addition of bird boxes and insect hotels. The customer approach towards warehouse facilities is certainly changing – and this will not be a short-term trend.

Today, most of Prologis’ new developments are tailored to the specific needs of tenants. Could it be said that Prologis has switched to specialising in BTS development?

We deliver both speculative and BTS facilities. But it’s important to understand exactly what we mean by BTS. In Poland, for example, BTS is associated with the development of a production facility in locations that are not obvious for warehouse development. It can also apply to buildings designed specifically for the activities of a customer on a long-term lease, meaning that after the lease is over such buildings are difficult to adapt for use by other customers. However, we should rather understand BTS as applying to projects that meet the very specific requirements of a customer who leases the property over the long term. These can be production facilities, semi-production facilities or assembly centres. But they can also be those designed purely for logistics operations, because today even logistics buildings have to be very carefully adapted to the specific operational and technological systems that customers are going to use in the facilities.

Developing a building is one thing, but managing it after its completion stage is another. Which of these two aspects is more important to you?

You can now say that post-development services – the so-called operations phase – is just as important, if not more so, than the development phase itself. Our goal is to focus on customer care to provide best-in-class customer service. That’s why we have our own internal property management department and why we created our own Customer Experience Team structures, where the commercial, leasing, property management and project management teams work together as one team, serving our customers throughout the entire term of the lease contract. Now we are stepping up further in Poland and elsewhere, where we employ our own facility managers and take facility management in-house in order to raise the level of our customer service even higher.

Are you currently working on any other concepts to make your tenants happier?

Yes, we are pioneering many such concepts as a way of staying ahead of what comes next. The key to our strategy is to constantly monitor and react to how our customers are using our properties – and that covers many different areas. We look to address what we call their ‘pain points’ by anticipating and responding immediately to their specific needs and all the problems that might arise as they run their businesses and evolve. The availability/retention of employees is one of the most important drivers for companies today. This is why we are developing all these wellbeing concepts, as we endeavour to provide much more than just industrial and logistics buildings: we are creating spaces and places where our customers’ businesses can thrive, where employees enjoy coming to work, and where communities and nature can flourish.

How do you do that exactly?

Our core programme for this is Parklife – a project to help our customers and their employees benefit from a wide range of services and conveniences designed to support their activities. The point of the project is to change how a warehouse facility is perceived – so that it is not just regarded as one of the hundreds of warehouses across the region. We aim to create high-quality working environments for all our customers. For example, we design our parks to include recreational areas where employees can enjoy outdoor activities, picnics or take a break during a busy day. We provide a number of solutions for our customers in order to make their travel to and from work easier, including various public transport options and, in Hungary, a free car-sharing platform. Some of our parks have electric car charging stations, while other sites have bike shelters for those who choose to cycle to work. We have found this completely changes the perception of such a warehouse.

You have also built football pitches in some of your parks.

Yes, we have! As a committed supporter of healthy lifestyles and employee wellbeing, we have built five-a-side football pitches in some of our parks. We have three such projects in Central Europe so far. Two are in our Hungarian parks and another is in Bratislava. These are master-planned parks, each of about 300,000 to 400,000 sqm, where hundreds, if not thousands, of people are employed. These football projects are not implemented for any financial gain, they are purely a social benefit, which also provide an opportunity for our customers to hold company events or simply relax during or after working hours. We launched the first Prologis Budapest Football Games in 2014, which was an immediate success and is now an eagerly awaited autumn event. Unfortunately, this year’s event, for obvious health and safety reasons, has been cancelled, but we are getting ready for the next season. Our customers have told us that if we could no longer hold these annual football tournaments in Bratislava or Budapest they would definitely miss them.

Such projects have been isolated cases so far. Sports grounds are still hardly a common feature of warehouse parks.

Football pitches are merely one of the most eye-catching examples of the kind of extra amenities and services that we are providing in our parks, but there are many others. We have launched, for example, the Smart Metering System mobile app, through which customers can monitor their consumption of electricity, water and gas from anywhere in the world, helping them to cut costs and make significant savings. The app also allows you to set limits on consumption and associated alerts, so that if certain levels are breached you receive a notification. But that’s not all – our Prologis FM app can also be used for carpooling. People can share information about who is coming to work, when, how and from where, allowing them to form groups to travel in together, thus saving money and the environment. In several parks we have regular catering services in the form of food trucks, which park at certain times at particular places in the parks. And information about who is coming and going from the park and at what time is also managed by our internal communicators for health and safety reasons.

I see that environmental, social and corporate governance, or ESG, is something that Prologis likes to talk about. Why do you attach such importance to it?

USD 2.2 tln worth of goods flows through our distribution centres each year, representing almost 2.5 pct of the world’s GDP. As they say, with great power comes great responsibility. Given the importance of our role in the global economy, we feel incredibly responsible for mitigating our impact on the planet and for looking after humanity’s home. Sustainability has always been in our DNA. We strive for excellence in our environmental stewardship, social responsibility, ethics and governance. We try to be an exemplary corporate citizen, to minimise our environmental impact and to maximise beneficial outcomes for all our stakeholders. For many years we have been recognised as one the most sustainable companies in the real estate world. Just this year, Corporate Knights Global 100 ranked Prologis as the most sustainable real estate company in the world, the sixth most sustainable corporation in the US and the 26th overall in its listings; and we are now included in the Dow Jones Sustainability World Index, which has placed us among the top 10 pct of sustainable global companies. One of our biggest achievements this year is becoming the first real estate company on the S&P 100 to achieve operational carbon neutrality.

Is the Polish branch of Prologis actively involved in achieving ESG goals?

Our Polish office has, in many respects, been driving many of these changes. The Polish portfolio was the first in Europe to fully implement a smart metering system for utilities. The Singu FM system is designed to support property management and maintenance, and which can be used for communication between ourselves and our customers, as well as between the customers themselves. It was first implemented in Poland and later rolled out across our global portfolio. It should be borne in mind that we have become very used to change over the last three decades. The entire social and economic environment has been transformed in Poland. We are extremely open to all forms of innovation and actually look to instigate change.

Can you give us any examples of that?

Just look at some of the other sustainability measures that we have implemented. Since 2008, every new Prologis development is accredited by BREEAM – the oldest worldwide independent sustainability assessment scheme for buildings and infrastructure projects. This highlights the commitment of Prologis to delivering sustainable facilities to its customers in the region. There is the aforementioned Parklife project in Central Europe, through which our customers and their employees can benefit from a wide range of services and conveniences designed to support their activities in the park. In Poland, you can see first-hand the sustainable design features that we employ to reduce emissions and reduce customers’ utility costs. These include: cool roofs, energy-efficient lighting, hybrid and carpool parking and bicycle storage, low-emitting sealants, adhesives and carpet systems, recycled and locally sourced construction materials, skylights and clerestory windows as well as water conservation.

One of the changes that Prologis is making across its entire global portfolio is replacing traditional lighting with LED lighting. By 2022, the company is aiming to have upgraded all the buildings in its portfolio in this way.

This goal stems from Prologis’ approach to sustainability and environmental responsibility. In Poland, for instance, we developed some buildings 20 years ago. What’s remarkable is that these buildings are continuing to be leased and customers still successfully operate their businesses out of them. Our LED Essentials programme is about replacing lighting with very modern, high-quality LED versions with lighting sensors. This year, in Central Europe we have already replaced the lighting of almost 300,000 sqm of warehouse space and want to reach almost half a million by the end of the year. We are doing this in cooperation with our customers, who do not have to pay upfront for the investment but instead contribute just EUR 1 a year per sqm. This still gives the customer at least EUR 1.5 per sqm in electricity savings for normal warehouse operations. The scheme has been very well received by our customers.

Prologis Essentials is about more than just replacing lighting, but also involves a host of other measures. Clients can buy warehouse racks and forklifts at lower prices as well.

Yes, this year we started introducing this programme or – if you like – developing it as an additional offer to our customers. With Prologis Essentials we go beyond the building and use the advantages that come with our global scale to offer our customers a convenient place to shop for curated products, like forklifts, racking, LED lighting, SolarSmart, and other services and products required for building maintenance, such as gates, at attractive rates. Together with carefully selected vendor and installation partners, who meticulously plan installations, logistics, appropriate crew sizes and take care to limit any operational disruption – we help to make our customers’ lives easier and free up their valuable time. Given the positive reception we have received from customers, we are going to develop Prologis Essentials further. In addition to our Essentials Marketplace in Europe, the next phases of our Prologis Essentials platform will include facility management and customer resource services, to provide the highest care in all interactions with our customers.

It looks like this business goes beyond what warehouse owners and property managers usually do. Would you agree?

Yes, although we are pioneering a trend that is becoming more and more visible across the industry. I am convinced that warehouses, especially in the case of Prologis, will soon cease to be a product and will become more of a service. We want to go in that direction and, indeed, we are already heading that way. We are no longer offering just a product, but going beyond the four walls and a roof to provide services that make our customers’ lives easier and their businesses run more smoothly. We are revolutionising the way that customers access the services and the support they need to run their operations more efficiently, cost-effectively and sustainably. It’s not just about developing a building anymore, but about offering an entire suite of services. That’s the main difference that marks us out today: we deliver the best space and places for our customers, their employees, their local communities and the global environment.