VGP is a pan-European developer, manager and owner of high-quality logistics and semi-industrial real estate. Since 2007, they have a strong presence on the Romanian market, owning warehouse spaces in Timisoara, Arad, Brasov, Bucharest and Sibiu.
You took the lead at VGP Romania in February 2020, right before the pandemic blew over - how did you navigate the uncertain times that followed?
I was actively seeking a way to improve myself career wise and the country manager role with VGP fulfilled this wish. If in the beginning there was uncertainty regarding the logistics and industrial sector, the pandemic proved to be a real boon for them, later on. VGP started an expansion process in Romania in 2019 - securing land banks, building warehouses and renting them (we customarily are a long term asset owner) in order to become a top ranked & relevant player on the market. So my arrival came at a time when ambitious development plans of VGP on the local market would start really coming to fruition.
VGP has a strong footprint across Europe - how does Romania fare in the larger vision of the group?
At the moment Germany takes the central spot in our group - around 60% of the entire portfolio, but there are emergent markets that are rapidly growing: Benelux, Czech Republic, Spain, Italy, Hungary.
In Romania, one year ago VGP was present in an industrial park in Timisoara, another one in Sibiu and several plots of land. Since then, we inaugurated a first warehouse in VGP Park Brasov and are about to start three more located in Arad, Bucharest & Brasov again. At the moment we have 165,000 sqm in use. In five months’ time, we will have five fully functional and up for business parks, adding over 100,000 sqm GLA thus passing the quarter of a million sqm mark.
Are there any particular industry segments that are driving this growing demand?
The location of VGP’s multi-tenant parks determines somehow the tenant’s profile and our warehouses are versatile enough to fit many types of industry & most of the occupiers’ needs. For example in VGP Park Timisoara, located in the vicinity of the airport, the predominant sectors are courier, logistics with some units in the light industry segment whilst the other locations that are situated near large conurbations may easily accommodate retail clients , fashion, pharma, DIY, etc.
You secure only prime locations for your land bank - what is the criteria employed to make the decision regarding the location of the parks?
VGP's CEO is the main decision maker when it comes to choosing the best plots of land. Of course, we can give suggestions, but in the end, it's a touch and feel process where he visits all locations prior to any acquisition and decides personally for a go/no go. A prime location needs to have great visibility and to be right next to pre-existent main road/rail infrastructure. Unlike other players, we tend to buy and immediately develop locations that are already placed in prime spots, near main urban regions & connected by express roads or highways. At the moment, it's not easy to find such premium locations but, fortunately, we have already secured many of the plots that were of interest to us.
Becoming sustainable and using modern technologies is the norm nowadays - how do your tenants respond to these measures, cost wise?
Sustainable development of our parks has been a prime concern at VGP in the past years, therefore all our buildings need to be certified BREEAM Very good, to incorporate green & energy saving features. Additionally, wherever possible we deploy photovoltaic panel installation on the roof of VGP parks to make use of the large surfaces available and produce green energy for our tenants’ benefit.
On the other hand, large corporate tenants, especially from the industrial segment, are deploying significant CAPEX expenditure in the fit-out of our warehouses once let. As long term occupiers they are as well very much interested in modern, state of the art technologies, that VGP aims to incorporate in our buildings, so in the end is a win-win partnership for the environment and the communities we are present in.
What are some of the main differences between class A sustainable warehouses and their class B or C counterparts?
Compared to Class B premises, a modern Class A fairly large sized logistic & semi-industrial park, like the ones VGP develops & operates in Romania and the EU, offers in many ways benefits of a collaborative nature (common pool of workforce, joint utilities network, commute options, park amenities). Add to this a higher free height inside the building that offers more storage space per sqm of footprint & improved technical specifications, and what you get are reduced maintenance and operational expenses too. Access to these buildings is more streamlined, there are no bottlenecks in operations thanks to appropriate access infrastructure and operating docks ratio already in place. Thus we can expect that Class B or C warehouses (still many under operation on our market) are turning obsolete at a higher pace than before.
All in all you have a lot on your plate for the Romanian market, what are the main priorities for the next two to three years?
In three years’ time we aim to expand our local portfolio towards the mark of 1 million sqm GLA. Both our internal corporate structures & financing scheme as well as the forecasted market growth have the optimal parameters to allow for such an evolution. VGP Park Bucharest and VGP Park Brasov Park are performing extremely well, we are already close to full occupancy in VGP Park Timisoara thus looking for expansion there, VGP Park Arad is starting on a good path already and we are aiming for other main cities.
Do you have a final message about the Romanian real estate market?
Even though in absolute terms our Class A stock is much smaller than in other CEE countries, our market offers much better yields that fuel the development and the growth pace is faster. Demand is on a roll, 2021 will most likely be a record year driven by retail, pharma, e-commerce & courier activities. With the upcoming nearshoring of production facilities from overseas to the SE border of the EU we expect an extra wave for semi-industrial spaces.
We have immense confidence in the potential of the Romanian industrial real estate segment and advise businesses to come & join our parks!
