Another record year

‘Eurobuild Central & Eastern Europe’: What is the current state of the warehouse market in Poland and what are the latest trends?

Joanna Sinkiewicz, partner, industrial and logistics department director, Cushman & Wakefield: We have had record results in this segment for several years – and this year also promises to be sensational. This is reflected in our summary of H1. I expect that 2018 will end with more records broken. The dynamism of the warehouse market is largely being driven by the development of online sales. This, in turn, requires excellent logistics – an online shopper expects fast, efficient and cheaper delivery as well as an excellent after-sales service. Delivery within 24 hours has become the norm, while same-day delivery is also becoming more and more common. This cannot be organised without an adequate warehouse and logistics chain. I’m talking here not only about the giants, such as Zalando or Amazon, but also the city warehouses that are now popping up everywhere. Production companies are expanding due to the positive economic situation, while new players are also entering the fray and opening plants in the country. As for Poland’s main advantages, international companies insist that these include its ideal geographical location, the quality of the labour force (rated higher than those of neighbouring countries) and the labour costs, which amount to around a third of the Western European average. It should be noted, however, that the warehouse market is also facing challenges. The availability of labour is becoming increasingly limited, especially in large urban centres. There are also the growing costs of warehouse development, in terms of salaries and building materials. This has been putting pressure on rents. Our figures are showing 10 pct annual increases in effective rates. Developers have been signalling that their costs are growing, so they will also expect to receive higher rents. However, due to the intense activity of developers and the competition between them, tenants are still able to obtain very attractive terms.

Does this mean that locating warehouses in Poland could soon cease to be profitable?

The gap in the rent levels for warehouses is considerable. It’s around 15 pct – even compared to other countries in the region, such as the Czech Republic, Slovakia or Hungary. We should also remember that Poland is an attractive market in itself, as the largest country in the region. The increased costs, however, have been having an impact on something else. They are leading people to consider or even decide to increase the automation of warehouse processes. Now companies are opting to invest in semi-automatic or automatic warehouses.

Could Poland become a transhipment centre for the Asia–Western Europe route?

We are unlikely to overtake Germany in this respect, as it has harbours capable of handling such large shipments of goods. Some of the companies who process Far Eastern goods have located their central warehouses for Europe in Poland. However, the scale of these activities is nothing out of the ordinary.

Are the improvements in the country’s infrastructure enhancing the attractiveness of new locations on Poland’s warehousing map?

The growth in the warehouse market is one of the consequences of the improvements to the transport network. For years, the so-called ‘eastern wall’ of Poland was closed to warehouses in this respect. However, with the development of the road network, it is beginning to open up to new projects, such as for manufacturing or distribution companies. Cities such as Białystok, Lublin, Rzeszów and Kielce are already benefiting from this. Modern class ‘A’ warehouse space is now being developed in these locations. The improved transport links for these cities will lead to their further development, especially since they have another advantage – a much better job market from the point of view of the employer.

A law was introduced in Poland a few quarters ago that restricted the sale of agricultural land. How did this affect the warehouse scene?

The new regulations had an impact on the market by limiting the possibilities for constructing new projects on agricultural land. They did not prevent this, but they strung out the investment process. Sometimes by a few months, sometimes longer. Nevertheless, the investment process related to storage space in Poland is undoubtedly the shortest in Europe. For example, in the Czech Republic the construction of a warehouse on a site prepared for such a project and even with a building permit takes another 24 months. In Poland it was six months until recently and now the process has sometimes lengthened to 8–10 months due to the boom on the market, the involvement of general contractors and administrative issues.

What impact is this having on the prices of land for warehouses?

It has grown, although not exorbitantly. There is still a lot of attractive land available for warehousing in Poland.

How will the Polish warehouse market progress over the next few quarters?

We have a very good situation on the demand side and have not been getting any disturbing signals. As long as companies develop and increase the demand for new space, others will supply it. I expect that 2019 will also be excellent in this respect for Polish warehousing. The demand is driving the supply, which will be record-breaking this year – and we will soon be reaching the level of 16 mln sqm of warehouses built. There are signs that the Polish market is interested in other large warehouse developers and investors, thanks to which the financing for new projects is being made available. In the past, potential investors have asked about office buildings or shopping centres and warehouses were less attractive to them – but these days they sometimes start with enquiries about warehouses.

How long can this boom last?

Everyone has been asking themselves this question for at least two or three years. The answers vary, but the market is still developing very well. I expect that the next few years will be very good. If we compare Poland to Western European countries, the amount of storage space is still relatively small here.

How significant is the Polish market compared to the rest of Europe?

We are one of the most dynamic markets on the continent. And the investor interest in it is confirmation of its growing status. ν