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The future of logistics

Logistics transformation: urban, green, digital

87 billion parcels were shipped worldwide in 2018. According to the Pitney Bowes Parcel Shipping Index, that equals a surge of 104 per cent compared to 2014. By 2025, the index forecasts that parcel delivery volume will have climbed to approximately 200 billion.

These figures clearly show the dynamics in (both the B2C and B2B segment of) the logistics sector. If the logistics sector fails, the economy rapidly breaks down; even the smallest delays can incur production stops with high financial defaults. According to Prof. Dr Dr h.c. Michael ten Hompel, managing director at the Fraunhofer Institute for Material Flow and Logistics, "whoever manages the global logistics chains, manages the global economy."

Sector challenges

However, the high and rising demand for the provision of goods poses major challenges for the logistics industry: traffic systems are already strained, with gridlock a frequent threat in cities. A frantic search for new solutions is underway. Drones, robot trucks, underground transport routes, truck convoys ('platooning') and many other processes and technologies are currently being tested as to their viability. The key word 'urban logistics' (also known as 'city logistics') summarises a number of concepts under development for a few years now to relieve urban infrastructure and increase profitability of urban freight transport.

At the same time, the logistics sector must comply with rising sustainability requirements and develop environmentally friendly solutions. Therefore, nearly all logistics companies are considering electrification of their fleets, the construction of micro-hubs (i.e. small stores in town) and of deposit systems at the recipients' destination, as well as an increase in night-delivery. Often, the properties operated by logistics companies offer further potential to reduce the carbon footprint.

Digitalisation pioneer

Digitalisation can help coping with these tasks – and at the same time is a challenge for itself. Digitalisation has contributed substantially to making logistics processes more transparent, efficient, and better manageable. Its many advantages regarding transport and the provision of goods have made the logistics industry one of the most digitalised sectors.

For experts like Michael ten Hompel, the logistics industry is thus the driver of digitalisation. The potential for the use of artificial intelligence in this sector is huge. Prof. ten Hompel: "One of the reasons for the potential: the logistics sector is similarly conducive to the application of algorithms, and already standardised (in detail) to quite a large extent – yet also extremely complex." Topics such as IT security, cloud computing, industry 4.0, internet of things, blockchain and smart contracting are also all reflected in logistics. In addition, autonomous transport systems, robots, and multimodal tracking and tracing systems have long become a part of everyday life in the logistics sector.

Changing requirements for logistics properties

However, the dynamic nature of the logistics industry and the many challenges also impact another area: the operators' properties. The location, building and store equipment, as well as their carbon footprint, are increasingly important success factors in the industry – not least due to the scarcity of space, especially in cities. Since the logistics industry is likely to continue to evolve significantly, the properties' usability concept has to be very flexible.

A team of internationally experienced bankers and logistics experts at Aareal Bank has been dealing with the specific requirements of logistics companies for 20 years, supporting the logistics industry in choosing and financing its properties.

The team's most recent project: in September 2019, Aareal Bank provided a five-year financing of around €240 million for a pan-European logistics network. The portfolio comprises a total of three logistics buildings located in Spain, France and Great Britain. The newly-constructed buildings are state-of-the-art logistics platforms with comprehensive digital functionalities. "This exposure underlines our expertise in financing complex cross-border pan-European logistics portfolios. And it especially proves our ability to implement technological trends – together with our clients," says Klaus Severin Schöttmer, Managing Director Special Property Finance at Aareal Bank.

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Video with Klaus Severin Schöttmer

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