Ishmael Clement He is CEO and Vice President of the real estate group Merlin Properties. He has been these days in Barcelona on the occasion of the celebration of the International Logistics Exhibition (SIL). Merlin is one of the main real estate companies listed on the Spanish stock market. Now it has the focus on ‘datacenters’ and logistics platforms. He sees clouds on the horizon and criticizes the industrial commitment to the Nissan land in the Free Trade Zone.
How is the matter of the Nissan land?
It was an excellent opportunity to place projection and capacity for expansion in the real estate logistics hinterland of the port of Barcelona, but for whatever reasons that was not wanted. They don’t even want to see us.
Haven’t there been more favorable changes for the logistics in view of the opening of the contest?
Do not know what it is, but do not want to logistics. In the end, we are talking about surfaces of 70,000 square meters, which is a minute within 500,000 meters available.
In the end, won’t half of the land be for logistics?
It remains to be seen how it turns out. The Consorci de la Zona Franca (CZFB) has already reached the limit in the negotiation and will issue a bidding document that will allow it to secure its income. The last attempts of the negotiators were about the reduction of rents, and that is something that the CZFB cannot admit. What is intended is that the logistics company pay the canon to the industrial part so that everything comes out for free and receives aid from PERTE. It threatens to be a subsidized economy.
Reindustrialize…
The term industrialization is from past centuries. Is it more white-collar to tighten screws on a production line than to be in a logistics warehouse with a forklift? Is logistics blue collar?
But the CZFB has repeatedly defended the logistics option…
Yes, but it has not been heeded at the reindustrialization table. The canon is a priority. Vía Cilsa (Merlin’s company that participates in the Nissan contest) will do what it can. An interesting proposal was already made, with a data center infrastructure for the city of Marseille, but we were ignored. And it was a very important hyperscalar project, but it was not possible due to the opposition of the table. There are elements that have marginalized our project and we do not know the reasons. In a few years it may be discovered but it will surely be through the Prosecutor’s Office. There is something, for whatever reason, that makes them ignore us.
All for the industry…
We are crazy. We can put the industry almost anywhere. In Montcada or Baix Penedès, but it makes no sense to build industrial facilities in the first isochrone of Barcelona in a situation of lack of land. We do not understand it nor do we aspire to understand anything.
Moment of euphoria in the logistics sector shown at SIL…
The situation is delicate. A crisis is seen in the medium term. There may already be a supply crisis, which does not tarnish the primary trend of the market at all, but whoever gets caught…
Medium term?
Maybe three years. But if a project takes five years to develop, there will be those who catch the crisis along the way. oversupply crisis.
Isn’t it a bit early, in full logistical euphoria, to talk about oversupply?
It seems soon. And everyone in the industry gets angry when I say that. But the first conditions are being given for that to happen. There are more and more insurance companies and people who have not done logistics in their lives who are investing. If at one point there is a contraction in demand, it will affect them more than anyone else. An example is the US, the fact that Amazon has slowed down its logistics expansion is a clear sign that the penetration of the ‘online’ channel has limits. From being with annual growth of 30% or 35% has gone to ‘growth’ sub 20% in the US. The logistics expansion has stopped dead. Amazon came to represent 26% of the logistics market in the US.
Is there a stoppage of projects?
Everywhere. All companies have paralyzed projects due to rising construction costs. In residential everything has stopped. It is no longer possible to transfer the increase in costs to house prices.
A serious crisis?
Oversupply crises are quite common in the real estate sector. It is about reacting calmly, reducing developments and moderating prices.
How do you see the rate hike?
At what interest would anyone lend to Spain for 10 years? Uncertainty must be put at a price. But between 3% and 3.5% will be the debt. And mortgages will not fall below 5%.
Related news
Dramatic.
No need to get depressed. The situation is not going to be the same as in 2008. Then, the leverage level of the listed real estate sector in Spain was 77%. Now, the average level is 40%. We have income of 440 million from rents and 75 from debt. We can be calm.