Risk is not an option
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Aneta Cichla
The warehouse market is facing new challenges. In some regions of the country the supply of ready-for-lease areas is decreasing, which is at least one thing that is making developers happy. However, the market conditions are not conducive to developing speculative projects and tenant behaviour is hard to predict
These are the issues that were discussed at the ?CEE Logistics and Warehouse Conference' on October 24th at Warsaw's InterContinental hotel. For the first time the conference had a so-called "expert's lodge" that listened to the panel discussions and made comments. The expert lodge included Renata Osiecka (Axi Immo), Krzysztof Kienorow, (Colliers International), Tom Listowski (Cushman & Wakefield), Patrick Kurowski (CBRE Polska) and Sean Doyle (CBRE Polska). The conference was led by Ewa Andrzejewska, the editor-in-chief of ?Eurobuild CEE'.
The first topic was the continuing decrease in the ready supply of warehouse space. Tomasz Olszewski of Jones Lang LaSalle, who was moderating the discussion, pointed out that this was the result of increasing demand in some regions. "Vacant space is slowly starting to run out in Silesia," said Rafał Tarasewicz of DB Schenker. Meanwhile, Maciej Walenda of Raben Polska talked about competition between developers and logistic operators. "I cannot see a problem with competition here because logistics tenants consider developers to be a buffer," he said. Radosław Kochta of MLP Group stated that logistics operators might become competitors in certain situations. "Especially at the beginning of a project, when we are wondering whether to carry it out ourselves or together with a logistics operator," he added. Rafał Tarasewicz was slightly more sceptical and emphasised that there were projects in the FMCG sector where a distributor wanted to lease space for itself and outsource logistics services. "We do not like to enter such projects, as they are quite risky and complicated," he stated. Robert Dobrzycki of Panattoni Europe was of a similar opinion: "We will not build a facility with an area of 40,000-50,000 sqm for an operator who will sign a two- or three-year agreement. It is too risky and hard to finance these days," he said. While summing up the discussion all the panellists agreed with Tomasz Olszewski's predictions of a slight upward trend for rents in the best locations. The number of companies interested in the everyday costs of operating a warehouse facility has been growing. Tenants are more and more often requiring that developers know about green solutions. This was the conclusion of the debate on the costs of new solutions in the construction of warehouses. The discussion was moderated by Peter Maitland (EC Harris), while the other participants included Florian Wnuck (GSE Group) and Craig Maguire (PointPark Properties). Both agreed that the greatest costs were generated by plot and material purchases, logistics and labour. A return on such an investment requires a lot of expenditure at the beginning of a project. "The developer and the contractor have to specify their expectations precisely. In order to do this they need to talk with their partners, so that innovations concerning, for example, saving the water can be introduced. These solutions require additional expenditure but they also increase the value of a project," said Florian Wnuck. He was echoed by Craig Maguire, who emphasised that a contractor could offer the latest construction solutions and say how much they would cost as well as, importantly, the savings an investor could make because of them. However, the client is not eager to spend more on construction. "Polish companies rarely use modern technologies that support the information flow in supply chains," said Michał Grabia of the Institute of Logistics and Warehousing, who moderated the discussion on modern tools in supply chains. "As a supplier of technological solutions I can say that clients must be clearly presented with the profits of such an investment. They have to be convinced that despite the expenditure they benefit from the optimisation of processes, the reduction of errors and the time needed to carry out the operations," added Jacek Liber of BCS Polska. Grzegorz Lichocki, a representative of Dachser, stressed that clients were not willing to incur costs of this type. "It is often the case that clients accuse us of high prices. However, it is not possible to create anything of high value without the financial expenditure. It is a question of focusing on either the price or the quality," he concluded. The conference also introduced a new ?duel discussion' format. The first was a head-to-head between two opposite views on warehouses as an investment product. The moderator this time was Maciej Chmielewski of Colliers International.Mieczysław Godzisz (Hines Polska) talked about the potential of investment in warehouses, and Dennis M. Dart (KSP Real Estate Investment Management), was sceptical about such purchases. According to the latter, the warehouse market does not have any of the added value that investment funds are looking for. Warehouses' potential as an investment product is weakened by strong competition and a small return on the capital. However, Mieczysław Godzisz emphasised the security of warehouse investments. The warehouse market is stable, which ensures a low risk. "I like making money, but I like not losing it even more," he argued. In reply to a question from Maciej Chmielewski on which sort of facilities his fund would like to buy, Dennis M. Dart said: "We try to look for first class products in the best locations, in transport hubs which connect large urban centres or even countries. We look for products with a few tenants, not just one, and of a very high quality." According to Mieczysław Godzisz, such products are practically non-existent. Developers do not sell their best projects. Group shopping was the next topic. Dawid Doliński of the Institute of Logistics and Warehousing, Marcin Raszka (EBP Systems) and Ryszard Sobański (an independent expert) discussed buyers' consolidation opportunities. Producers associations, which are established in order to negotiate better conditions, are becoming increasingly common, despite technical barriers. Bartosz Mierzwiak (Prologis) and Roger P. Peters (Goodman) took part in the next ?duel discussion', moderated by Renata Osiecka. The interlocutors had to answer the basic question: is the situation on the market allowing companies to return to speculative investment? "This question will be answered by this passing year. We have to remember that speculative development is an indication of an improving situation in a country," said Bartosz Mierzwiak. "The golden age for such projects in Poland is over," stated Roger P. Peters. He declared that Goodman was planning to develop speculative projects in Gdańsk and Kraków because of the close proximity of airports and, in the case of Gdańsk, also the harbour. "Our strategy also involves operating on global markets. What this means for Poland is that we will be present in five regions and only in the best locations," revealed Bartosz Mierzwiak. Both market players concluded that flexibility was what counted nowadays, but not at all costs. "We try to adapt to the situation but sometimes we just have to say no to a client," claimed Roger P. Peters, to which Bartosz Mierzwiak added: "Especially if this concerns projects in Bydgoszcz or Suwałki". AC
The first topic was the continuing decrease in the ready supply of warehouse space. Tomasz Olszewski of Jones Lang LaSalle, who was moderating the discussion, pointed out that this was the result of increasing demand in some regions. "Vacant space is slowly starting to run out in Silesia," said Rafał Tarasewicz of DB Schenker. Meanwhile, Maciej Walenda of Raben Polska talked about competition between developers and logistic operators. "I cannot see a problem with competition here because logistics tenants consider developers to be a buffer," he said. Radosław Kochta of MLP Group stated that logistics operators might become competitors in certain situations. "Especially at the beginning of a project, when we are wondering whether to carry it out ourselves or together with a logistics operator," he added. Rafał Tarasewicz was slightly more sceptical and emphasised that there were projects in the FMCG sector where a distributor wanted to lease space for itself and outsource logistics services. "We do not like to enter such projects, as they are quite risky and complicated," he stated. Robert Dobrzycki of Panattoni Europe was of a similar opinion: "We will not build a facility with an area of 40,000-50,000 sqm for an operator who will sign a two- or three-year agreement. It is too risky and hard to finance these days," he said. While summing up the discussion all the panellists agreed with Tomasz Olszewski's predictions of a slight upward trend for rents in the best locations. The number of companies interested in the everyday costs of operating a warehouse facility has been growing. Tenants are more and more often requiring that developers know about green solutions. This was the conclusion of the debate on the costs of new solutions in the construction of warehouses. The discussion was moderated by Peter Maitland (EC Harris), while the other participants included Florian Wnuck (GSE Group) and Craig Maguire (PointPark Properties). Both agreed that the greatest costs were generated by plot and material purchases, logistics and labour. A return on such an investment requires a lot of expenditure at the beginning of a project. "The developer and the contractor have to specify their expectations precisely. In order to do this they need to talk with their partners, so that innovations concerning, for example, saving the water can be introduced. These solutions require additional expenditure but they also increase the value of a project," said Florian Wnuck. He was echoed by Craig Maguire, who emphasised that a contractor could offer the latest construction solutions and say how much they would cost as well as, importantly, the savings an investor could make because of them. However, the client is not eager to spend more on construction. "Polish companies rarely use modern technologies that support the information flow in supply chains," said Michał Grabia of the Institute of Logistics and Warehousing, who moderated the discussion on modern tools in supply chains. "As a supplier of technological solutions I can say that clients must be clearly presented with the profits of such an investment. They have to be convinced that despite the expenditure they benefit from the optimisation of processes, the reduction of errors and the time needed to carry out the operations," added Jacek Liber of BCS Polska. Grzegorz Lichocki, a representative of Dachser, stressed that clients were not willing to incur costs of this type. "It is often the case that clients accuse us of high prices. However, it is not possible to create anything of high value without the financial expenditure. It is a question of focusing on either the price or the quality," he concluded. The conference also introduced a new ?duel discussion' format. The first was a head-to-head between two opposite views on warehouses as an investment product. The moderator this time was Maciej Chmielewski of Colliers International.Mieczysław Godzisz (Hines Polska) talked about the potential of investment in warehouses, and Dennis M. Dart (KSP Real Estate Investment Management), was sceptical about such purchases. According to the latter, the warehouse market does not have any of the added value that investment funds are looking for. Warehouses' potential as an investment product is weakened by strong competition and a small return on the capital. However, Mieczysław Godzisz emphasised the security of warehouse investments. The warehouse market is stable, which ensures a low risk. "I like making money, but I like not losing it even more," he argued. In reply to a question from Maciej Chmielewski on which sort of facilities his fund would like to buy, Dennis M. Dart said: "We try to look for first class products in the best locations, in transport hubs which connect large urban centres or even countries. We look for products with a few tenants, not just one, and of a very high quality." According to Mieczysław Godzisz, such products are practically non-existent. Developers do not sell their best projects. Group shopping was the next topic. Dawid Doliński of the Institute of Logistics and Warehousing, Marcin Raszka (EBP Systems) and Ryszard Sobański (an independent expert) discussed buyers' consolidation opportunities. Producers associations, which are established in order to negotiate better conditions, are becoming increasingly common, despite technical barriers. Bartosz Mierzwiak (Prologis) and Roger P. Peters (Goodman) took part in the next ?duel discussion', moderated by Renata Osiecka. The interlocutors had to answer the basic question: is the situation on the market allowing companies to return to speculative investment? "This question will be answered by this passing year. We have to remember that speculative development is an indication of an improving situation in a country," said Bartosz Mierzwiak. "The golden age for such projects in Poland is over," stated Roger P. Peters. He declared that Goodman was planning to develop speculative projects in Gdańsk and Kraków because of the close proximity of airports and, in the case of Gdańsk, also the harbour. "Our strategy also involves operating on global markets. What this means for Poland is that we will be present in five regions and only in the best locations," revealed Bartosz Mierzwiak. Both market players concluded that flexibility was what counted nowadays, but not at all costs. "We try to adapt to the situation but sometimes we just have to say no to a client," claimed Roger P. Peters, to which Bartosz Mierzwiak added: "Especially if this concerns projects in Bydgoszcz or Suwałki". AC
