Shopping for sheds

The boom in Polish retail affecting the warehouse sector? ‘Eurobuild Poland’ speaks to Simon Hollins, director for the CEE region of industrial developer Segro

z Nathan North, “Eurobuild Poland”: How much of your business is accounted for by customers from the retail sector?

Simon Hollins, director for the CEE region, Segro: We’ve got retailers in each of our parks, probably accounting for 25 pct of our business. For other operators it is difficult to say – one big letting can change things dramatically – but I would say most big developers will have somewhere between 20 and 40 pct of their space taken by retailers. It is quite an encouraging spread we have – logistics companies etc. The boom in retail in Poland, especially in the big population centres, has increased the demand for warehousing – so distribution centres and supply chains have to be set up. It certainly underlines the need to be close to major population centres. There is a weight of demand, particularly from areas such as Silesia, which needs serving. A centre such as Stryków can theoretically serve the whole of Poland – especially once the motorways are built.

z How has the rise of internet shopping changed the scene for warehousing?

With internet shopping you have to consider how supermarkets cope with this. Some of them have set up warehousing purely for internet customers. This can involve assembling the orders, distribution to the stores – in some cases leading to a highly automated system, with picking and racking done by machines. The box at the end of the process would contain all the customer’s orders and would be deposited with the driver. Some retailers would use such a system for collecting the orders; in other cases, the customers themselves pick the orders up.

Internet shopping has proved itself, but it has not yet taken the place of traditional shopping by any means. It is rather an important addition to retailing. It’s here to stay – but the question is, how much the market it is going to take? If a tenant needs to be set up for this, then we to have to facilitate it. The racking system has to be fundamentally different – but warehouses have to be built to allow for other possibilities. Whether an occupier is to be a tenant or the landlord can depend on how much they want to invest in automation, if they want in to be owner-occupiers or have a longer lease.

None of our clients has a particularly automated retail system just yet, but we do have such clients in Western Europe and I see no reason why it won’t be coming to Poland in a bigger way in the future.

z Which locations in Poland are currently the most advantageous, and which do you think will become hot-spots in the future?

As well as the locations we already have, if you go along with the population argument, then you would have to take a serious look at places such as the TriCity, Wrocław, and Kraków. It may be possible to serve the latter from Silesia, depending on the number of outlets a retailer has in the city, as well as whether the goods supplied have to be fresh and need daily deliveries, or if instead they are more durable and can be delivered less frequently and from a longer distance.

The regional cities have all done extremely well in terms in retail development. A location such as the TriCity has a population of 700,000-800,000, and this would provide the main driver that warehousing investors are looking for. But once the motorway infrastructure is in place, it could also become an entry point for goods coming into the country – and it will become a more interesting market. But I think we won’t see the same scale of expansion in this market as we are seeing with Silesia.

z Do you think the influx of retailers will lead to there being more local distribution centres, or more centrally located ones?

Retailers looking to target particular areas will need local warehousing – say, a distribution centre in the north or the south – as they need it to be accessible to the local populations they are serving. If they are opening several stores in Silesia, then they will need warehousing in that particular region. Or if, on the other hand, they intend to operate over the whole of Poland, or they are selling inert products – for example, floor coverings – they will want to be more centrally located. It is not only big supermarkets that are coming to Poland, but sports goods retailers – and for the latter there is no requirement for local distribution centres.

A centre such as ours in Stryków benefits both from its central location and from being on the doorstep of Łódź – Poland’s second largest city. For the moment, the main advantage is that it is close to a large conurbation, but when the motorway infrastructure finally comes, the central location should prove to be a huge attraction for retail tenants.

z How important is Poland now in terms of warehousing for retailers?

The more retailers there are, the more goods there are to distribute, and the more warehousing space there needs to be. So much has been built in the last couple of years, but if you compare the square metres to the population, it’s quite a small amount per head when you consider countries in Western Europe. We tend to forget this when we think about all the activity that has been going on recently.

z And how does Poland compare with other countries in the region in terms of location for warehousing?

From the retail perspective, Poland’s big advantage lies in its sheer population – especially the size and scale of the markets in secondary cities. Warsaw may be similar in size to Prague and Budapest, but Poland is streets ahead of Czech and Hungary in terms of regional cities, which are major markets in their own right.

In Stryków we have Komfort as a tenant, which doesn’t have an issue with proximity to the markets, and can distribute their goods all over the country. But supermarkets need their warehousing to be close to their markets. Fashion retailers could certainly access the German market. At what stage would they consider having a dedicated distribution centre in Poland or Czech? Huntleigh Health Care are setting up in Poznań and want this centre to serve Germany as well as Poland. H&M distributes over a much larger area than Poland alone.

There is clearly a significant amount of pent-up demand – the question is how quickly this can be satisfied. We think that the market will soon begin to calm down, but it will remain an interesting market. We want to build up a regional network of storage and warehousing parks, and also for other sectors, as well as big boxes. There’s still more mileage in big boxes – but this cannot last forever.

Infrastructure will become a large factor – it will speed up the whole distribution process, maybe halving delivery times. This might lead to a situation where fewer warehousing centres are needed – not in terms of sqm, but in the number of parks. It could become more economical to have fewer, larger parks serving wider areas.

z Do you see Poland becoming a regional distribution hub for retailers, in terms of serving the markets to the east that are now opening up?

Poland could become a hub for markets further east, and for some companies it already is. But the infrastructure in the eastern part of Poland needs to improve dramatically. I don’t see this happening for Russia – it is simply too far away. But Ukraine ia also a huge market and it is a little easier to see this happening, as people are finding it difficult to find modern warehousing space there, so it is a good option in the short or medium term.

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