Light work

Manufacturers choose to rent space in warehouse and logistics centres, finding it more expensive, time-consuming and risky to build their own developments

What does light industry manufacture? According to real estate market experts, almost everything.

“The common notion of light manufacturing actually includes any shop floor operations which require the use of machinery and large numbers of staff, other than warehousing and heavy manufacturing. It might be pharmaceutical manufacturing which requires special conditions or precise optical manufacturing, however packing of products is also defined as light manufacturing,” says Tomasz Branecki, the owner of Jartom, a real estate agency.

Market demand for products is so variable that having completed the construction of a manufacturing plant that lasted a few years you may find out that your product is obsolete. Moreover, an individual investment requires large capital, an adequate plot of land and a pile of hard-won documents and approvals.

“As there are few new manufacturing facilities for lease, manufacturers choose to lease and adapt warehouses,” asserts Tomasz Branecki of Jartom. “Such a facility must meet a number of requirements, including adequate lighting and power supply, customized ventilation or the number of gates to dispatch the manufactured goods, to name just a few.”

Built to suit

Light manufacturing in a warehouse centre – irrespective of its character – will always call for adaptation of the facility to a smaller or larger extent. Manufacturers have two options: either adapt spaces located in existing warehouse centres or commission a developer to carry out the project in a built-to-suit system.

“Manufacturers who would like to lease a facility at once and sign a relatively short-term lease contract have to settle for speculative warehouse space,” according to Waldemar Olejnik, associate director at CB Richard Ellis. “And those who have more time for the investment and special requirements – e.g. regarding floor bearing capacity, height or location of the building – choose build-to-suit facilities. The choice of a way to obtain space for light manufacturing is always the art of compromise between the accessibility of the facility, the availability of well-qualified personnel and the costs of the lease.”

Choosing a build-to-suit facility and the necessity of making the lease decision even before the first excavation is made in the ground may become an issue.

“For instance, ImmoIndustrie Group or Panattoni do not build speculatively. The whole investment process is preceded by signing long-term lease agreements, selecting the location and tailoring the facility to satisfy the needs of the customer,” says Waldemar Olejnik. “Within
7 or 10 years, which is the most common duration for such an agreement, there is a chance for the investment to pay for itself. After this time, agreements are usually renegotiated and extended. And if a lease agreement is discontinued, a new tenant must be found.”

At someone else’s place

A company which chooses to adapt an existing facility must find such a logistics operator who will let them introduce far-reaching modifications in their facility. Is it easy to obtain such permission? Some experts believe that it is not a problem due to the high supply of warehouse space, others are of the opinion that owing to the good market situation developers can choose customers, and they prefer to lease their space to companies which do not have to make substantial adaptations, since they often consider modifications of their buildings to be the equivalent of damage or at least a permanent change in their character.

It is a fact that light manufacturing operations usually require more employees than warehousing itself, and therefore more space for staff must be provided when adapting the facility – toilets, changing rooms, canteens – and certainly it must be equipped with adequate facilities. And sometimes other tenants complain about the vicinity of manufacturing plants due to the noise or smell. Thus light manufacturing-friendly developers are rare.

“In my opinion, Millennium Logistic Park in Pruszków is the warehouse complex that best suits light manufacturing operations,” believes Tomasz Branecki. “The facility has almost 100,000 sqm of total area, which also includes old but modernised warehouses of various sizes. It is definitely easier to adapt them to meet the requirements of light manufacturing, for instance owing to their large windows which provide necessary sunlight for manufacturing operations.”

The easiest solution

The other reason for light manufacturing to move into large scale warehousing space is the economic boom, which has led companies to focus on their core operations, and not on the development of manufacturing facilities. In addition, this kind of outsourcing makes facility management much easier, therefore it is a good choice for companies operating in a corporate system and that have to clear all decisions with their management abroad.