Redefining commercial real estate in response to expectations of high rent
Multistorey buildings help overcome the land scarcity challenge
Faced with market challenges such as land scarcity, investors and developers are scrambling to get their hands on the most valuable sites, where high-rise construction is the only solution for growth.
Rent is determined by the profitability requirements of developers/investors matched to the end users’ ability to pay. And the level of tension in the market is becoming extreme.
Attractive rents for both end users and investors
For the occupants’ business growth, essential & strategic design criteria include truck access to the upper levels, location in an urban area (close to customers), and adapted space for manoeuvring. As a result, logistics operators may consider paying a higher rent if it is offset by the prospect of long-term performance and returns.
From the investor’s perspective, the construction costs of a multistorey facility are likely to be higher due to the building’s design. However, the scarcity of options in strategic locations makes it possible to increase rents.
In the multistorey sector, rents have fluctuated significantly over the years. In 2019, the average rent for a unit on an upper floor in the Paris Region was approximately €140 per sqm.
In 2020, during the Covid pandemic, prices dropped to about €100 per sqm. But by 2022, rents had bounced back to around €150 per sqm. Although 2023 was marked by stagnation, an increase is forecast in 2024-2025, to an estimated €160 per sqm. However, rents can reach as much as €300 per sqm for multistorey last-mile logistics centres in the Paris Region.
These variations are averages for a sample of buildings across the region and do not fully reflect the sharp differences in rent levels and their fluctuations. One should compare the rates charged for urban logistics rather than traditional warehouses located in greenfield developments outside the city. When comparing last-mile logistics sites, the difference in cost essentially depends on the presence of one or several floors, as well as whether there is an access ramp for vehicles.
Optimising space to increase the profitability of multistorey buildings
Multistorey buildings are convenient solutions to bring several users under a single roof: up to 16 at the Four Parx site in Hamburg. This helps minimise risk by spreading it among tenants. These buildings are also more resilient to market fluctuations because they can accommodate different types of activities: courier services, traditional logistics, offices, etc.
More and more local authorities are won over by the concept of a multistorey, mixed-use building, best suited to the challenges of land scarcity. This innovative approach responds effectively to these constraints and helps to maintain a site’s profitability.
In focus: a multistorey facility in Paris’ Aerolians business park
Located at the heart of the Aerolians business park, next to Paris Charles-de-Gaulle airport, plot SN3 extends over 23,065 m². Investors MAGELLAN and HARBERT joined forces for this speculative development, creating a multistorey business park with a total floor space of 20,347 m².
Comprising three modular buildings with a total of 19 units from 470 m² upwards, it is suited to various industrial activities and crafts.
The project focuses on high environmental standards, aiming to obtain the BREEAM Very Good certificate. It also aims for the Positive Energy and Carbon Reduction labels at the E2C1 level, as well as the BiodiverCity label.
Handover of the SN3 Aerolians plot is scheduled for June 2024. This project transcends its status as a simple business park to embody an avant-garde and responsible vision of the future of industrial space.
For more about Aerolians, click here
