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Propertyshe Podcast: Soumen Das

Posted on 03 May 2022

The sort of take-up of technology and the use of technology is pretty patchy across the industry because you can just about keep going right now without… whilst using it in pieces but frankly, a spreadsheet here and a spreadsheet there and you can just about keep going but that’s not a, I say, a long-term solution for whether it’s for SEGRO or for the industry as a whole.

Susan Freeman

Hi, I am Susan Freeman, welcome back to our PropertyShe podcast series brought to you by Mishcon de Reya, in association with the London Real Estate Forum, where I get to interview some of the key influencers in the world of real estate and the built environment. Today, I am delighted to welcome Soumen Das. Soumen is the CFO of SEGRO, the leading pan-European developer, manager and owner of warehouses and industrial property. SEGRO is listed on the London Stock Exchange and Euronext Paris and is a constituent of the FTSE 100. By market value, it's the largest publicly listed REIT in Europe. Soumen joined SEGRO in 2017 and combines leadership of the finance functions with a wider contribution to the business through strategy, investment and innovation. He brings his extensive board-level experience and deep knowledge of capital markets to the Group, having been CFO of listed companies for over twelve years and with a background in corporate finance. Soumen is also a non-exec Director of Next plc, a member of the FTSE 100 and one of the UK’s leading retailers. So, now we are going to hear from Soumen Das about his career to date and the challenges and opportunities facing the logistics and industrial sector.

Soumen, good morning and welcome to the studio.

Soumen Das

Morning Susan.

Susan Freeman

Let’s just start a little bit just talking about your background and how you came to be at SEGRO because I think your background isn’t, isn’t in surveying or accountancy so, slightly unusual route in.

Soumen Das

Yeah, that’s very fair. Morning everybody. So, yes, you are right because I’m the Chief Financial Officer of SEGRO, which is the largest REIT, the largest Real Estate Investment Trust, across Europe and for my sins, I’m neither a surveyor nor an accountant. I was… when I left university I joined UBS, the investment bank, I was there for nine years, I took a completely random and I guess reasons of entirely serendipity, I was put into the Real Estate team and my clients were the big real estate companies of that day, it was British Land, Land Securities, Slough Estates as it happened, and people like Redamco in Europe. I was there for nine years. I had a fantastic education but I just had enough, frankly, and I decided I really wanted to go client side by the time I was about thirty and, but I worked for Manish Chande at was Mountgrange, now Clearbell, and after a couple of years which terrific experience and frankly I managed, it’s a fantastic leader and something I’m still very much in touch with today. I joined Liberty International, which is one of my sort of best clients back from days at UBS, which then split into two. I became the Finance Director of Capital & Counties, the London-based business, which I always say was entirely down to being right place, right time. I was thirty-three years old, a complete novice FD, there were people on the Board twice my age, heaven knows what people like Andrew Huntley and Ian Henderson thought of me at the time but certainly by the time I left, I think I’d proven what I could do and SEGRO came knocking in 2016 and I joined the beginning of ’17 and I’ve been here what, just over five years and it’s been a phenomenal journey.

Susan Freeman

So, it has been a phenomenal journey and SEGRO just seems to be going from strength to strength no doubt due to the fact that you’re the Chief Financial Officer but it’s now I think the largest listed UK Real Estate REIT, you’ve just posted a very positive trading update. I mean, what is… is it just that you are in a sector, industrial and logistics, which is so strong at the moment or is the whole you know transition strategy over the last ten years or so that David Sleath started?

Soumen Das

I think with everything in life there’s a bit of luck and a bit of judgement and you need a bit of both frankly, to be successful. To be honest, you know you’re absolutely right, David became Chief Executive just over ten years ago and you know I have to say the business had quite a difficult financial crisis but it did some really smart things and I guess the smartest of which was to buy its nearest competitor, Brixton. Now you know neither company was in great financial shape and so it did really hurt and I think the sort of four or five years when after David took over were, you know, really cleaning up the company, putting in a huge amount of work to really set in place a very clear strategy of owning the very best real estate assets, warehousing assets, in the best locations and selling everything else. And I often say to investors when I meet them for the first time that it would be easy to say that SEGRO’s success is down to the fact that you know there was a massive ecommerce boom and everybody wants warehousing but the reality is, we’re doing as well as we are because of the really hard yards, the team, well before I joined frankly, put in, in the early part of the last decade because that capital that was taken out of the assets we thought were going to underperform was reinvested into really fantastic new assets either through buying them or through developing new ones. So, we’ve got in our, my opinion and in our opinion, the very best portfolio across the UK and across Europe. It’s super modern, it’s brilliantly occupied by some amazing customers and we’ve sold and got rid of everything that you might want. So, as ever, I think there’s, you know the market has been stronger I think than anybody might have guessed ten years ago but we put ourselves in the right position through the work that we did and I say, you know I think I, there’s a bit of serendipity again in terms of arriving in 2017 just as we were kind of working away out of the sort of the restructuring phase and into much more of the growth phase of the business and I think the sort of mix of skills around the boardroom and around the exec room have really helped deliver this growth.

Susan Freeman

And the portfolio isn’t just UK is it?  You are also spread across Europe. What proportion is actually UK based?

Soumen Das

Yes, so we’re two-thirds UK and one-third Europe and in Europe the biggest company, the biggest countries as you can imagine are Germany and France, Italy and then Poland and we’ve also got holdings in Spain, in The Czech Republic and in Holland.

Susan Freeman

So, you, you don’t have plans to diversify out of your sectors, you are focussed on those sectors?

Soumen Das

Absolutely. No, no, it’s all about warehousing and within warehousing, it’s, I mean I think it’s described as the poor cousin of real estate, going back in time you know, everybody, certainly when I joined twenty-five years ago, it was all about the office market and isn’t retail brilliant, it’s super kind of, it’s the least volatility and it’s the best asset class to own, that was the traditional view twenty-five years ago. And industrial was always kind of the hardest sector to, and smallest, and that’s obviously turned on its head so, now where industrial has become you know one of the largest traded sectors across EMS markets across Europe and I think we’ve, we, what I think, specialism has worked and that’s one of the big things about real estate and asset trusts across the world, is one of the views it that you leave it to the investors this side, which, where to allocate their capital and ultimately you want a really good, smart management teams focussing on where they can have the most value. So, for us, it’s really those eight countries and it’s all about warehousing but within warehousing there are only two distinct products we work in, one is the urban which again is two-thirds of our business, and the other is the big box and they’re quite, they’re similar but they are different and I think where we are quite different is not only we’re the largest, we’re also the largest owner of urban warehousing across our market.

Susan Freeman

And do you see this as continuing because obviously this is you know warehouses’ moment and you know other real estate sectors are really feeling the pressure?  Do you see this continuing or do you think it’s a bit of a boom?

Soumen Das

I think there is a, I think there is a genuine structural change taking place, which has undeniably been accelerated through the pandemic but we point to four big trends. We point to digitalisation of the economy, which you can see through ecommerce, you can see it through data centres, you know it’s been the way that all of us work and live our lives and so digitalisation is a huge driver. Urbanisation, you know continuing and that was clearly the one with the big question mark through the pandemic but as we’ve kind of come through the other side, I think you know London and Paris and Berlin and others have reasserted themselves, people want to live together and it is important to understand that when digitalisation and urbanisation come together, you get some really powerful trends because the economies of scale you have for operators of being able to service a large volume of people with relatively high levels of disposable income, who live close together, that creates more and more digital concepts, so there will be companies, I guarantee, that we will lease to in the next I don’t know three to five years that haven’t even been founded yet. Now, the other two trends that I think are coming down the track very fast are sustainability, which we’ve been talking about for a long time, has definitely got a big leg up through the pandemic and has got a second big leg up through you know current energy crisis and the Ukraine crisis and I think sustainability is becoming much more of a watch word and that will really change the way we operate. And the resilience piece, you know localisation of supply chains, bringing production, bringing inventories, bringing stocks back onshore, again that’s definitely a trend that’s happening. So, you put those four together and those are long-term trends, Susan, so as I say, I think there’s been a definite acceleration through the pandemic but I think this is very much a long-term structural change that we are part of.

Susan Freeman

And, I mean there are some really interesting themes there and I think we will hopefully get to them all during the course of this conversation but just picking up on the urbanisation, you have recently talked about your London strategy and announced that you know SEGRO has completed £195 million of investment in London so, this presumably is part of the you know part of the strategy to get you know closer and closer to the centre to satisfy the demands of your customers to you know sort of the last mile delivery, being able to service these new grocery companies that you know seem to be able to deliver things to your door almost before you’ve ordered them. So, are we going to be seeing more of this?

Soumen Das

I hope so, definitely. Look I think we felt for a very long time that the urban warehousing opportunity delivers the best long-term returns because what you’ve got is all those structural trends we just talked about coinciding with a complete lack of land supply and when you put those two together, what you get is very healthy levels of long-term and sustainable you know rental and capital growth. You are absolutely right, why is that happening?  It’s because you’ve got this population that’s there who craves, the consumers want digital product or they consume it, you know whether it’s you know whether it’s choice, convenience, price for whatever reason, digital channels are going to be the way that we continue to consume. But you know so we’ve got people like Gorillas and Deliveroo and others that you might expect with these superfast delivery operators, you’ve got Amazon clearly and Ocado and others in our portfolio but I think when we looked at our take-up last year, who we were leasing to in places like London and the South East of England, what was by the far largest piece was to technology as a whole so not just the operators, talking about people like Netflix, digital media agencies, and why are they there, well because they’re not doing last mile delivery, what they are doing is they need to be close to their staff, they need to be close to the kind of highly skilled people that they need to run their businesses as well and our space offers a very flexible blank canvas really for very different types of businesses to operate from. So what we’d say is, you know our purpose is to create the space to allow extraordinary things to happen and it really is that, when you look around all the different user groups and the all the different types of industries and all the different customers that we have, it’s fascinating what goes on in across our warehouses.

Susan Freeman

So, you are getting occupiers who wouldn’t have been your traditional operators, you know the creative industries, are they squeezing out the traditional occupiers and are rents going up as a result?

Soumen Das

Rents are definitely going up because you’ve demand that is very high. Across the whole of the UK last year, 50 million square feet of space was taken, I mean that just under ten thousand football fields, if you want to kind of sort of try and picture it, so it’s an enormous amount of space. So, you’ve got huge demand and in the urban areas like in London, you’ve got very constrained supply because there’s no land. So, yes, rents are going up. What I think they’re seeing is a bit of recycling, a bit of movement within our occupier base. Those that really need to be in the very best locations and the very best, very most modern assets, will pay to be there but those that, maybe some of those more traditional occupiers that need to be reasonably well located but don’t need to be in the absolutely top spec, most modern buildings, will move out and we are seeing a little bit of that and our retention rate, which is kind of the measure of the number of customers that we retain at the end of the lease, you know, moved down slightly from sort of high 80s to 77% last year but that’s still 3 in 4 of our occupiers that we’re keeping, so it’s not, you shouldn’t read into this that there is you know wholesale change across the customer profile.

Susan Freeman

So, you mentioned some of your occupiers and you also you know said that some of the occupiers you know they won’t exist yet. Do you have any thoughts on what the next wave of your new occupiers are going to be?  Is there anything coming down the line that is new?

Soumen Das

Good question. Look, so, two years ago we didn’t even, we weren’t even talking about these you know these superfast delivery operators, we probably leased ten, twelve units to them and they’re clearly… that’s happened because so much on grocery has moved online, so that’s, it’s the second and third order effects that you see, that you just cannot predict, it’s just as more and more spend moves online, more and more smaller concepts become viral. We’ve seen it and if you talk about the creative industries, you are absolutely right and we can see a definite increasing trend there because studio space in places like London and the South East is very, very constrained so, again, when you, it’s not just the asset it’s also the technicians, the people who edit and create the content, where do they all kind of live and they’re all very much you know concentrated in certain areas, so that’s one big user group again that you know when we started building our facility up in north London, in Enfield, Netflix was not who we thought we were going to be leasing to but they came along, knocked on our door and here we are today. And then you are beginning to see people like electric vehicle manufacturers beginning to start you know we had, we’ve had a lease to Tesla in Holland for a number of years now but, you know there’s people like Rivian and others beginning to start thinking about take space out. So, it’s quite a… there’s just so much change going on, I think it’s almost impossible to predict but yeah across all the different industries we’re seeing it, it’s very, very busy.

Susan Freeman

And your role at SEGRO, I mean describing yourself as Chief Financial Officer I think probably understates it doesn’t it because I think you are also responsible for strategy, investment and innovation so, and as you say there is so much going on at the moment, you must be pretty busy but what’s also you know I think really interesting about SEGRO as well as you know obviously you know providing the best space, you are innovating in terms of you know what industrial and warehouse space is going to look like and I wondered you know if we can talk a little bit about you know some of the plans that you have for multistorey industrial, I think on the Slough Trading Estate you are planning a seven storey industrial development, I mean that is completely new to this country, isn’t it?

Soumen Das

You are absolutely right, I mean I think that will be the tallest industrial building that we are aware of, certainly in the UK and probably across Europe. I guess it’s again how the products are changing, how the customer base is evolving a little bit and making the best use of the land that we have. It appears you know you can’t squeeze a quart in the pint pot, you’ve got to do something else and therefore going up is the answer. Now going up in warehouse terms is more complicated than it sounds because there are two big issues. The first is, for any occupier who is occupying the upper floors, they want resilience, they want to make sure they can get to their buildings and therefore what you need to make sure is you’ve got very good resilient ramp access. What that really means is you’re having to give away some of your floor space that you might otherwise have built a ground floor warehouse to build the access to go up. The second thing is, it costs more because suddenly you are having to put sufficient you know loading into all of the upper floors to be able to cope with what you are going to. So it’s not as simple as you know build twice or three times as much space by going up into the economic, it does, it’s quite a different equation and one of the things about warehousing typically, is they are very easy, quick and relatively cheap to put up but when you go multistorey, you start becoming technically more challenging. But no I guess the forerun of the Slough scheme you mentioned was actually joint venture we are doing with Berkeley Homes. We sold them a site actually back in 2016, which is in Park Royal, a place called North Fields and they have created a phenomenal residential scheme there called Grand Union and as part of the planning there they had to take two acres of the twenty-two acre site as an industrial usage so we’ve JVd with Berkeley, with St George, to create a six storey scheme there called Generator, which is a really interesting way of using that space and appealing to users because not all of the users that we have require sort of heavy goods and lots of movement, lots of them are workshops, lots of them are quite creative, you are talking about so they’re not you know moving goods in and out of the warehouse all the time so they don’t need loading bays. So those upper floors we expect will be occupied by slightly different segments of our customers than the lower floors and that’s been quite an interesting little piece of work we’ve been doing in the last couple of years and that’s really led us to the Trading Estate. So the Trading Estate you know is 102 years old this week, which is quite a phenomenal feat and again thinking about innovation going back through this company, you know the Mobbs family who bought that site after the War, they bought it because that was where a lot of the vehicles were, you know that were used in the First World War were dumped and they built warehouses to repair the vehicles and their business plan was to sell the vehicles on, which they did brilliantly and at the end of that they were left with these warehouses on this big site on you know just outside of London and that’s how warehousing and you know Slough Estates ending up leasing this space. That’s how this company was born and it became the largest industrial manufacturing hub in Western Europe over the sort of period of sort of 1920 through to 1950 and then as the UK de-industrialised, the estate de-industrialised and so went through a slightly sorry patch frankly in the sort of late, in the 1980s, 1990s and you know The Office being set in Slough was no, was no coincidence. But today what’s happened is it has become roaring back as this hub of the digital economy. So today, Slough is the biggest hub of data centres in the whole of Europe, it’s the second biggest hub in the world. Why?  Because it supplies about a third of the data capacity that we use in London from the various data centres that we house there. You’ve got new occupiers, more and more higher tech occupiers coming in place to use that space. So why?  Because it’s right, it’s right next to London on the other side of Heathrow Airport. Incredibly easily, easy to access. So what we’ve suddenly thought is, we’ve actually got a lot of smaller customers who again don’t need to be on this ground floor warehousing, they can be up and that’s why we’ve chosen to develop this seven storey site in the middle, in the heart of the estate.

Susan Freeman

So, I mean so interesting you know when you talk about where the company started and where it is now, it’s quite fascinating. And just I mean looking at your JV with Berkeley, so you’ve got industrial adjacent to housing?  So, how does that work?  How close are they?

Soumen Das

It’s all on one site. A twenty-two acre site, about half of which, just under half of which is landscaping and gardens so, there’s more than enough space for the two to coexist, the key thing is obviously just thinking about kind of traffic movements and noise and the site that the two acres that we have putting the generator on actually fronts the North Circular so it’s obviously the noisiest bit of the site so it’s actually not where you would ideally put residential anyway. So it works very neatly. This whole piece around kind of industrial and residential you know they haven’t, certainly in the UK or Europe, historically coexisted but certainly when you go to Asia and you look at kind of other land constrained markets like Hong Kong or Singapore or others you know it’s quite common to have industrial on the ground or basement floors and residential or offices above. It really is a sort of case of needs must and we’ve seen a few examples, you know we’ve, you know we’ve there’s a site in Hayes that we bought a few years ago, we sold just under half of it to a residential developer and we’re developing the other half as industrial. Now, the two sites are contiguous but they are separate. We’ve done it in the old Guinness distillery actually in Park Royal, west of London, again part of that site is developed I think it was by Bellway as residential and part of it are five warehouses leased to people like John Lewis and Amazon and others. So, they do sit side by side and as long as you get the access right, it’s fine and so the noise levels and others, once the loading bays are shut, the noise doesn’t become a particular issue at all. And interesting in Paris we are doing this, if anything I’d say Paris because a lot more people live in the centre of Paris than do in the centre of London, we’ve certainly, we are trying a few other things again where we have taken basement space or other space as part of a wider mixed use plan.

Susan Freeman

I’m glad you mentioned Paris because I was looking at the, you were planning an underground last mile logistics centre at the Gobelins rail station so there, rather than going upwards, you are going, you are going down which again you know is not something that we’ve seen that much of. I mean is that difficult to do or does the underground sort of space already exist?

Soumen Das

So, in that particular instance, it’s an old goods terminal so there are two storeys of lorry height basement available, it’s just fallen into disrepair, it just hasn’t been utilised particularly well so we’re not having to dig down, it’s there but what’s happened is, it’s a place called Le Gobelins as you say, it’s right in the heart of Paris and it’s an extraordinary site really and we got involved what two or three years ago. The local municipality is quite keen to stimulate a bit of development in the area and so we partnered with Icade which is an office developer and they will build offices, well subject to planning, above ground but to enable the whole site we really, somebody needs to really come and put some energy and modernise the below piece and we thought it was an extraordinary opportunity really to take you know this very, very centrally located space, it’s unique, I mean who knows, yeah, who knows what the rents will be, who knows what it will be worth going forward because you just would never build this going forward but it happens to be as I say an old SNCF terminal but it just requires a little bit of vision and creativity to turn it into a very modern urban logistics facility right in the heart of Paris.

Susan Freeman

It’s interesting. I wonder if opportunities like that exist around London?

Soumen Das

You know it’s possible. A little bit. So we’ve looked at things like car parks and others and in fact in fairness you know British Land pipped us to the post actually last year on a, in Finsbury Circus where there’s you know someone like you might know there’s an underground car park there and we thought and as did British Land, it might make quite an interesting urban logistics facility. So I think, so yes I think it will happen in time. It’s so, so, it is interesting actually, we’ve probably got a few more examples of the underground and of the mixed use in Paris than in London but the two are probably, they’re very similar cities essentially, they are very, very high levels of population, 8 to 10 million people, they are very space constrained, you can only go up or down really in terms of building new space, they are you know the big economic hubs of their economies and therefore they create a huge amount of opportunity. So, they’re the two urban cities that we think at the most interesting, followed by somewhere like Berlin for example, which is smaller but it has a lot of energy about it as well. But you are absolutely right, trying, one of the things I think we think we do reasonably well is by operating in eight different countries, which have different characteristics, have different local issues, is really kind of taking the strategy, the insight that we learned from one market and trying to apply it to others as well.

Susan Freeman

And do you think, can industrial and logistics go into shopping malls that have lost their shine?

Soumen Das

Do you know I think that’s a tough one. I think one of the watch words when David and the team reignited the strategy ten years ago is, what we want to own are the very best buildings as I say in the best location and one of the things we want is key is generic space and one of the reasons I think we have such a great, diverse customer base is the fact that our space can be used by almost anybody. The problem with the shopping mall, in my opinion, is that they are incredibly bespoke buildings, they’ve been built for a very specific purpose and therefore converting an entire mall into a logistics facility for example is quite hard. I think you could certainly make the case that areas like you know some of the car parking, some of the larger units, some of the car… you know some of the you know just some of the sort of the surrounding areas, you could certainly develop into something else but I think the whole thing, I think it’s quite difficult to see that in sort of industrial use as an answer to that particular problem. When you contrast that we retail warehousing, well you could argue that retail warehousing and industrial warehouses are pretty much the same thing and I think there’s some truth in that. The reality is, you know typically again, the retail warehouses that trade well are the ones that are located where we want to put our industrial warehouses, you know the ones at the front, things like the North Circular or are near sort of population or residential hubs and therefore converting them is a challenge to get vacant possession and a challenge from a planning point of view so, a few will get done that way but I think there are few retail to industrial conversions that will happen than people might think.

Susan Freeman

One of the deals I wanted to ask you about was the Slough office campus that you bought back having sold to AW in 2016. What was the rationale in sort of selling it and then buying it back?

Soumen Das

Yeah well I guess sort of picking up on a couple of things I have talked about already actually, the rationale for selling it was all about that strategy from London 2012 which was only owning the very best industrial and selling everything else and at the time, you know just putting into financial terms I guess, the rents at Slough were probably £11 or £12 for the industrial and they were about double that for the offices and so in 2016 it made perfect sense because we could never see that space being anything other than offices, we didn’t need that space to run the Trading Estate behind it and so we sold it and what’s been interesting, as I was saying earlier, is how the Trading Estate has evolved and developed and the customers have really changed to a point where the rents on the Trading Estate, the industrial and data centre space, is now high teens, if not into the twenties. And so suddenly, whilst the office rents for those offices haven’t really moved, so suddenly you’ve got quite a different equation and I do remember two or three years ago we were slightly joking about it saying I wonder when it will make sense to buy back the offices and then midway off the road so through last year, the opportunity arose to have a conversation and in fact we said do you know what, the opportunity to own forty acres of land adjacent to the Trading Estate where we’ve got such phenomenal visibility on customer base, we know exactly what we can do and a mix of you know industrial, creative industries, maybe a data centre, you know all of that together will create an awful lot of, of you know new uses for that space, redeveloping what I think will become, are some quite tired old offices. So if we reckon we bought them back for the land, not the offices that sit above them.

Susan Freeman

No, it’s interesting how quickly things change really.

Soumen Das

It really has.

Susan Freeman

And do you offer warehouse as a service, sort of flexible type space, as we’re seeing in the office sector?

Soumen Das

Yeah it’s something we’ve looked at quite hard actually, so when we kicked our prop tech activities off three or four years ago, this was sort of obviously WeWork was in it’s ascendency at the time and I remember doing quite a bit of work actually around WeWork and trying to understand what was going on there and we spent quite a lot of time as a business really looking at whether there was an opportunity. I guess we made, there were two key themes. The first is, in many respects the 3PL, the third party logistics companies, people like DHL and others, actually already offer that service within a warehouse so in a sense what would do, so it’s quite different to the offices in that regard. What we did say is that there was a product that was really meeting this kind of smaller maybe startup type operation so, what we did was, yeah some of our smaller units, we’ve created both in Slough, London and other cities, where we’re prepared to lease them on you know a shorter form lease on a more flexible basis, in the hope actually, which has played out in a number of cases that they will grow with us, you know as they establish themselves, they’ll move into bigger space on more standard terms but it’s you know in the context of what, we manage what £12 billion worth of assets, it’s a very small of our business but it’s really interesting because it allows you know that generation of businesses of the future some space to nurture and to grow and if it works, it works well for both parties.

Susan Freeman

So you’ve got the enterprise quarter at Slough?

Soumen Das

That’s exactly it, yes.

Susan Freeman

So, okay, and you, obviously you touched on prop tech so perhaps you know it’s a good moment to talk about what you are doing so I know that you’ve invested in Fifth Wall, the prop tech VC fund and clearly there is so much innovation going on in your sector so, you know can you tell us a little bit about you know the new technology you are using and what’s coming down the line.

Soumen Das

Yeah of course. So look I joined in 2017 and so from my time at Capco I kind of, like I said I was bitten by the prop tech bug there because you know within REIT it was a very live, a very relevant conversation. So when I joined SEGRO I was quite keen to see what we could do and I guess I sort of think about this in two forms. One is what we do in terms of our internal systems and our processes and the second is how we, how we use technology with our customer base and the two are linked but they are slightly different and Fifth Wall came along right in the middle of that thought process, I mean it was I think I’ve used the word serendipity a couple of times in this call but I think it was serendipity, I remember so clearly having the call with Bredon, I think it was four years ago actually, it was my daughter’s sports day and I was on the, the call was right afterwards and I thought the call was going to last half an hour, it lasted an hour and a half, it was fascinating, I loved, it was just really interesting hearing what they were doing, what insights they were bringing to their clients and I was hooked and I thought what they could bring us was this brilliant line of sight into the best in class technology across real… across global real estate, in a way that we could never build ourselves and for us in the industrial sector well this was really about learning, it was really seeing what was working and what wasn’t working in other sectors and how much of that we might want to borrow, how much we might want to do within our space as well because it was interesting, when you look at the various technologies, the various prop tech companies that are out there, the majority tend to be in other sectors so you’ve got lots of offices, a lot in the sort of multifamily and residential sector but relatively few in the industrial. So this was really about our, as part of our overall approach just to really improve our line of sight and our knowledge and our, and what we are going to do. So, that’s been really enjoyable. So how have we applied that?  Well as I say, the boring bit is you know just improving our systems and we’ve just come off the back of a two year upgrade of our financial and accounting property management systems and I know this is, I say this is not stuff that really kind of lights anybody’s fire but the reality is unless you get your basic infrastructure right you can’t do anything interesting because otherwise you are constantly having to work around this and we just you know won’t, I remember it was a big decision we took right at the beginning of the pandemic as to whether we hit the go or no go, have we done all the prep work and we kind of felt well do you know what if we don’t hit go now, who knows when we’ll do it. So we hit it and two years on we, we just over the Easter weekend hit our big changeover on one of our key systems and fingers crossed it’s all worked but that was a really big milestone and that will allow us to use data in a much more flexible way to actually really just still be inside so I know we have within the business but in reality, historically, we’ve done it on a much more anecdotal basis and a little bit of luck, as opposed to really mining the hugely interesting information that we have across our business, across our customer groups and doing it in a very ordered and systematic fashion. So that’s been a huge exercise and you know my team are you know thanks to everybody involved frankly at SEGRO because they’ve done terrifically well through frankly ch… you know challenging time and competing priorities to deliver that, to deliver that process. And on the external facing side, it’s really things about things like sort of creating smart buildings so you know the average warehouse is becoming far more sophisticated, far bigger, and therefore putting in you know energy management systems for example you know sensors to measure heat loos, energy, you know under, they’re just too big these buildings to kind of keep an eye on them so you know our loading bays have been kept open for too long, you know how can we really help our customers reduce their carbon footprint by using smart technology to understand what’s going on inside those buildings. So that’s just one of the things that we’re looking at doing and that’s part of our kind of wide response for SEGRO activities which is really about reducing the carbon footprint of this business but also our customer’s businesses as well.

Susan Freeman

And obviously talking about data and you know how you use it more effectively within the organisation, do you think that this is something that the property sector as a whole you know has really you know grasped and is now doing and you know is there enough data sharing or are we as a sector sort of way behind on that?

Soumen Das

I’m sorry to say I think we are in the Stone Age compared to most others. I mean it’s interesting like you may know so I sit on the Board of Next, who I joined six or so months ago, phenomenal business and the way they’ve pivoted away from being a high street retailer into becoming a phenomenal omnichannel business, really and have built you know best in class technology in terms of their warehouse and operations which they are now partnering with other brands to monetise and to utilise and just having a little bit of sort of, just seeing a little bit of the technology they employ there, I can tell you, we are just light years behind other sectors. And I think it’s, the challenge in real estate is it’s always, there’s a lot of deals that happen and you know leases are very complicated and difficult and you know your firm, Susan, kind of does a lot of these things and how you go from that into something that’s standardised, that’s easy, that you can roll out, that you can then mine for data, there are lots of, there are lots of hurdles, I don’t, because we are a sort of a relatively low volume but high value transactions whereas retail is you know very, very high volume but low value transactions and that, unfortunately that bespoke bit that comes into every deal that we do, does rather work against standardisation, it then works against data and analytics. Now it’s a hurdle, I don’t think it’s a brick wall but it’s one of the things that I think make it harder to put in place but look we are you know we’ve grown out tech team from I don’t know less than ten people to probably twenty-five to thirty over this, over the time I’ve been here. So we were investing a lot of resource into this because we really think it matters because to put it very bluntly, I cannot see how we can do business in the next ten years the same way as we have done business for the last ten. It’s just, the world is changing, our customers will expect it, I mean that’s, I remember somebody saying to me, a customer saying you know I just wanted a warehouse and it’s so difficult to actually to do, compared to all the different things that I’ve put in place in terms of my supply chain, in terms of sourcing material, sourcing my product, I’ve done all that, I’ve built my website, I’ve done all that, really simple but the hard yards of actually getting a lease signed for a warehouse was one of the more painful pieces that this startup had to go through.

Susan Freeman

And why was it more painful?

Soumen Das

I, because the industry is, operates in a particular manner. So some of this is what we can do as a business and some of this is what we can do, what we as an industry need to do as well and you’ll know Susan because you’re very interested in this as well but the sort of take up of technology and the use of technology is pretty patchy across the industry because you can just about keep going right now without, whilst using it in pieces but frankly a spreadsheet here and a spreadsheet there and you can just about keep going but that’s not a I say a long-term solution whether it’s for SEGRO or for the industry as a whole.

Susan Freeman

And just the rate of change just seems exponential at the moment you know whether that is in part because of what we’ve been through with Covid lockdown but it’s things are certainly changing at great speed and we sort of talked about technology and sort of moved a little bit into sustainability and I know that you have got a very you know a substantial development programme at SEGRO so there is, there’s a lot of, lot of development going on. Are you able to use sustainable you know product, are you looking at concrete substitutes?  So where are you going on the sort of climate tech side of things?

Soumen Das

Yeah of course. Look, we launched 2020 back in 2015 and that was really about improving the way that we run our business and particularly making our development programme more sustainable. So for example, this year very, I think it was 97/98% of all materials in any redevelopment will be recycled not sent to landfill, that’s a huge improvement from where we would have been ten years ago. We are experimenting with quite a lot of things so low carbon concrete for example is something that we’ve used. We do laminated timber as an alternative to steel and what we’ve learned actually is it works, there’s nothing, no particular technical constraint around these different things. What we are running up against though is just simple capacity because the wider industry has, uses steel, uses concrete, it uses particular building methods, unless the industry makes a big stride to move to these lower carbon materials, the supply chain just won’t catch up and so the biggest constraint as I say is not technical it’s just the simple thing, there just isn’t enough of these lower carbon materials to go around. So that’s something where I think the industry should really make a big difference but you know we’re committed to you know operation to get to net zero by 2030 and that’s a, you know that’s something that we’ve worked through with science based targets who’ve approved that, that path down to net zero and that to be clear is not just the energy that we use but also what our customers utilise as well so in the lingo, not just scope one and two which is what we control but scope three actually what happens within our buildings as well, that’s quite a big undertaking, that requires a real partnership with our customers whether in places like Poland and where we actually source the energy, we’ve put them all onto Green tariff but in places like the UK where there’s much more of a kind of delineation where you hand the keys over at the lease and frankly you as the landlord don’t have that, you know no control really what goes on inside. It’s much more of a partnership so you know helping our customers understand how we might be able to help so for example kind of going in and rekitting them with LEDs rather than whatever lights we’d fitted previously because that saves a huge amount of energy and obviously our customers are on the same you know net zero journey as we are so that typically once we engage them, they’re quite interested and we can do this at scale across you know the two thousand different units that we have across the business. So that’s and then in terms of development programme, you know you cannot, you cannot get down to sort of net zero in terms of if you’re building new product but we are committed to reducing the intensity of our carbon footprint on the development programme by 20% by 2030.

Susan Freeman

And when you are agreeing terms with tenants and we know you know a lot of your occupiers they are many of them are on the same journey they you know they want to reduce carbon, are you finding that they’re prepared to pay extra for the you know technology and everything that goes into monitoring and reducing the carbon consumption of the building or do they expect you to bear the cost?

Soumen Das

Yes and no I’d say. It comes, if I bring it back right away to these four key long-term trends we talked about at the beginning of the call. The reality of that, I don’t think you can monetise that investment you make up front in terms of creating a really excellent, you know a really high class sustainably built building so, you know in the lingo I guess we’re committed to everything we build being BREEAM and very good at the very least but in reality you know and the vast majority of what you build is BREEAM excellent and certain things are now BREEAM outstanding. There’s a building in Park Royal that we refurbished last year which I believe is the only industrial warehouse that’s been refurbed to a BREEAM outstanding level. Now can I point to it and say that we were paid more on that lease than the one next door that wasn’t a BREEAM outstanding, I probably can’t but do I think as a long term business that that building will become, will be more resilient, that will perform better over time, it will be better occupied over time?  Yes, I think I can. So I think it’s less about the upfront economics and more about the long-term performance of that asset because as you say I because the occupiers of the future will regard those things that we’re kitting out now that might be a little bit above the norm, they’ll regard those as just standard fit out. So I think it’s about building resilience into our business and frankly it’s what sustainability needs right, it's about you know it’s having things that stand the test of time and that’s, so I put into those terms rather into necessarily an extra pound of the rent today.

Susan Freeman

And clearly the you know the real estate sector has a big role to play in carbon reduction. I mean do you think that the Government should be doing more to sort of drive this or is it up to the real estate sector to be you know driving it you know with changing behaviours and you know the sort of things that you’ve been talking about?

Soumen Das

Look, personally, I’ve never been in the camp of you know of any, I’ve never been somebody who says you know Government needs to do this because frankly I’m, given what I do and given the way I’m sort of wired, I believe it’s ultimately to sort of individuals and businesses to do the right thing and economics ultimately will win out. I do think therefore you know if you’re looking for, you know the energy crisis right now is clearly going to send a huge amount of investment, if it hasn’t done already, into renewable energy and therefore that will, that will drive this switch that we need and that’s, that ultimately is private individuals and businesses and that’s economics. Where the Government can make a difference is by, is in large scale infrastructure and making sure the legislation works and to give you a simple example, you know we doing the project what two years ago, well we got quite excited about the ability to use these really large flat surfaces, you know the rooves of our warehouses, and to put solar panels on them and we realised that actually we could do this at scale across our business, across the whole of the UK and across Europe, we could generate quite a lot of green renewable energy. Now, we have, we generate 35 megawatts today, which could power over 20,000 homes but we think we could do multiples of that but it’s amazing how quickly we run into problems from a legislative or from a kind of regulatory front because everyone of the eight countries we operate in has different regulations and very often if you think about the way the energy system has evolved, it’s all about central generation and then distribution out. So what the grid doesn’t really allow for is decentralised generation on lots of rooves on lots of warehouses that come back into the grid. So where our customers use the energy, fantastic but where we’ve got surplus energy that we want to put back into the grid, we found actually that the grids are not particularly willing to play along and we think there’s a huge disconnect here between what the Government is saying, which is they want to, they want businesses to go green, we’re saying we’ve got a fantastic idea, we’re willing to commit the capital to put these PV panels on the rooves and yet the infrastructure in the middle just doesn’t permit it. That’s incredibly frustrating. So I think that’s the role of Government, which is to make it easier to enact the things that I think businesses want to do.

Susan Freeman

Okay so there’s some work to be done there because it must be, it must be very frustrating if you’re unable to you know follow through with that. And there are obviously because logistics industrial is doing so well there are new investors and developers coming into the space, I mean do you feel at all challenged by that at SEGRO?

Soumen Das

I think, I think, this market has become far more competitive through the last couple of years, you know I mean the secret that was industrial real estate is well and truly out now so if we thought the market was competitive pre-Covid, it’s, it is you know you read about new funds being launched you know every month, if not every week. Look, do you know what, I, I’m a huge believer in competition as what drives you and it’s what creates innovation, it’s what creates the new and actually without competition, we’d all get lazy so, I’m really proud if I look at the business and the way it’s performed over the last couple of years, we’ve had you know if you look at the financial results in ’20 and ’21, you know two phenomenal years, it’s not because we’ve sat on our hands, it’s because all the hard work we’ve done in the past but we’ve leveraged our way into this, you know we’ve had our two biggest years of capital investment ever so whilst the business has been growing, it’s been growing partly because the market has grown but it’s been growing because we’ve wanted and made it grow by committing you know resource both in people terms, in pounds and euros, to you know we deployed over £2 billion last year, it’s a phenomenal sum compared to what we were doing five or ten years ago. So, look I think if you’ve got a great idea you can’t, protectionism never works, it’s all about using competition to drive better.

Susan Freeman

And you, I mean you’ve also innovated in funding. You launched some green bonds at a sort of particularly difficult time in the market, I mean did you sort of think twice about, about doing that and how was it received?

Soumen Das

You are absolutely right. We’ve actually, we’ve now launched, we’ve now priced over 2 billion euro’s worth of green bonds across SEGRO and across. We had something called the Green Finance Framework which is really about how we utilise those funds into our response for SEGRO activities, I mean so it’s entirely consistent and what we’ve seen is investors want to commit moneys and want to commit capital to companies that they can see have a very clear and very executable plan into this. So we’ve seen all four bonds go very well but you are absolutely right, the last ones that we issued which were what six or so weeks ago were a week or two after the Russian invasion of Ukraine and so markets were quite volatile and it was a pretty tricky decision to launch but the feedback we got from investors was you know they were you know they like us, they like what we’re doing and you know we issued just over a billion euros of bonds so we had 7 billion euros worth of orders so I guess that really speaks for itself. I think if investors, increasingly, I mean the due diligence that investors have to do is quite interesting and therefore if you can demonstrate what you are doing and very clearly explain and show examples of what you are doing, I think you will find capital, I think capital will be, it’s already gravitating frankly towards greener activities.

Susan Freeman

No, well it was yes it was sort of quite a brave thing to do at that point I think in the market. So, just turning to the real estate sector as a whole, I mean we talked about all the change that’s going on, which means that the industry is changing, which again sort of makes us focus on who is coming into the industry and like the younger, younger generation because it seems that different skill sets are needed and different ways of approaching things and I know you’re involved with Pathways to Property, which aims to improve diversity you know and actually starting at I think school or university level in bringing people into the industry. I would be really interested to just hear a little bit about that from you.

Soumen Das

Yes of course. Look you are absolutely right, I think we are and I’ve described us in the Stone Ages in terms of technology, I think we’re not far off when it comes to diversity to be entirely honest, I think. We are getting better but it’s still pretty shocking when you look at kind of how the lack of all forms of diversity frankly in terms of senior representation across the entire industry and it’s not going to change on its own, it actually, it requires intervention and it requires you know senior leaders within the business to commit time as well as money to really stimulating and finding the next generation of people to work in the industry to make it more diverse and I think Pathways is a fantastic example of how, of the good that we can do you know in over ten years it has been running, it’s engaged with what over 20,000 students through its summer school, that’s phenomenal. In terms of the number of kids that actually go on to university, it’s really very strong, a relatively small number of those actually come into work in the real estate industry so it’s quite a shame that having engaged with 20,000 of whom a 10% actually sort of apply to the summer school and just under a thousand come to the summer school, about half of those go to university but only about a hundred or so actually end up in property. So it’s quite, there’s quite a lot, that filter, where we’re finding people, so we’re losing them which seems a little bit strange so, we, even on the initiatives we have, we can do better. So, Paddy, you know Paddy Allen, who is Chair of Pathway, I think has been fantastic and you know I have spent, it’s funny actually, we got to know each other through the pandemic, we met for the first time about six months ago and he’s been a really you know the energy he’s brought to Pathways since he took over as Chair a year ago has been brilliant. So, there’s lots of good that we can do but we just, we have to, we have to accept we have to do things differently and we have to play the long game because this is really about you know we’re trying to get you know people who are in their teens actually to consider real estate as a, as a future career, who will not become leaders of you know for another thirty or so years so you’ve got, there’s a big conveyor belt here. Having said that, we also have a real duty today, those of like me who comes from an ethnic minority, I think, one thing I’ve really changed in actually in the ten years, twelve years I’ve sat on boards, is I think when I started I kind of almost hid my ethnicity, I wanted to sort of make it as easy as possible for other people to kind of relate to me within, around the boardroom so I kind of, I was, I sort of was as un-Indian as possible and actually, over the last twelve years I’ve changed, I’ve realised actually that’s such a big part of me and I have a duty to kind of the next generation of whether it’s Indian kids or others, to show that actually people like me do exist in business and in real estate and with a bit of luck and a bit of serendipity people also with the right actions, you can’t just wait for somebody to come and tap you on the shoulder, you’ve got to do this as an individual, you’ve got to take the right, you’ve got to put yourself in the right places and I think it’s important that we make ourselves really visible. So, Pathways is one, I’m very involved with, I read at Cambridge University and you know with four other people and I, we set up a thing called Get In Cambridge four years ago and this was really about funding ways to get to get the message out about Cambridge, there really was for, a much more diverse group of people than a lot of the media sort of implied and suggest and I think what really got me was there was an article I remember reading saying that Cambridge isn’t for people like us and that really upset me because I thought well I had the time of my life there, why, how could it not be for people like us and so the difference between the reality and what the sort of perception was enormous so we funded between the five of us a set of videos of a bunch of existing students who really kindly agreed to be filmed and we put those on YouTube and elsewhere and that’s really driven, really pleasingly, an increase in the number of ethnic diversity applicants and the number of people who are then coming through. And to be very clear, we haven’t reduced standards, the entry standards are what they’ve always been, it’s just about widening the gate, it’s about making sure more people understand what the opportunity is and that it’s relevant to them and it’s not just for somebody else. So, sorry it’s a bit of a long answer but I, it’s something I’m increasingly passionate about because I think it’s the one thing we absolutely have to do and you can’t leave it to somebody else, you know we as, I as an individual and as a senior leader, have to do this.

Susan Freeman

I think that’s absolutely right and I’m interested, I mean you talk about you know coming from an Indian family but you went to school and university here, I mean is there, is there anything about your you know your journey because obviously you know you’ve succeeded, you’re in this you know amazing role now, was there any sort of you know pivotal point for you in terms of your education and how you got to Cambridge?

Soumen Das

Yeah. I do talk about luck a lot and I think I’ve been, I have been fortunate but I also know looking at my career that I’ve always put myself into the positions so, I’ve always been quite proactive, I’ve always managed my own career I suppose, I’ve always tried to get myself out and about and to meet people and to try and maximise therefore the chances of that tap on the shoulder. Even all the way back at you know back at school or I guess I was lucky that I had a couple of teachers who believed in me and kind of were always quite and you do need somebody to back you to make you believe that you can go on because I think the most difficult thing you know if I try and think back to my teenage self, is I’m not sure I knew that the job I’m doing now even existed and it’s how you get from, that’s the thing, you are always learning and I think it’s just trying to stay, keep as an open a mind as possible and not close things off because you just don’t know what you don’t know and you, there is a bit of serendipity that played, a lot of serendipity but you’ve got to, you’ve got to make your own luck I’m afraid, I sound like a footballer.

Susan Freeman

No I think that, I think that’s great and it’s probably, it’s probably a good place to end and there’s also the added problem that the jobs that these kids are going to have when they you know finish university probably don’t exist now, so where you know you say you didn’t know about you know about the job, you know some of them don’t exist so it’s an added complication but Soumen that is great and thank you so much for your time today.

Soumen Das

No, thank you very much for inviting me, Susan, really great to talk.

Susan Freeman

Thank you, Soumen Das, for bringing us up to date on the huge change and innovation currently disrupting the logistics and industrial sector and for highlighting the important role of luck and serendipity. So, that’s it for now. I hope you enjoyed today’s conversation. Please join us for the next PropertyShe podcast interview coming very soon.

The Propertyshe podcast is brought to you by Mishcon de Reya in association with the London Real Estate Forum and can be found at Mishcon.com/PropertyShe along with all our interviews and programme notes. The podcasts are also available to subscribe to on your Apple podcast app, on Spotify and whatever podcast app you use. Do continue to subscribe and let us have your feedback and comments and, most importantly, suggestions for future guests and of course you can continue to follow me on Twitter @Propertyshe and on LinkedIn for a very regular commentary on all things real estate, Prop Tech and the built environment.

Soumen is the CFO of SEGRO plc, the leading pan-European developer, manager and owner of warehouses and industrial property. SEGRO is listed on the London Stock Exchange and Euronext Paris and is a constituent of the FTSE100. By market value, it's the largest publicly-listed REIT in Europe. He joined SEGRO in January 2017 and combines leadership of the finance functions with a wider contribution to the business through strategy, investment and innovation.

He brings his extensive board-level experience and deep knowledge of capital markets to the Group, having been Chief Financial Officer of listed companies for over 12 years and with a background in corporate finance.

Soumen is also a Non-executive Director of Next plc, a member of the FTSE100 and one of the UK’s leading retailers.

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