Stronger, fitter, healthier sheds

“The e-commerce sector will remain one of the main driving forces for the warehouse property market,” insists Magdalena Szulc, industrial developer Segro’s director for Central Europe. Paweł Sapek, the senior vice-president and regional head for Central Europe at rival company Prologis, is of a similar opinion: “Each 100 basis point increase in e-commerce could mean a growth in the demand for logistics real estate of almost 2 mln sqm,” he predicts. Tomasz Listowski, a partner and head of the warehouse and industrial department for the CEE region at tenant consultancy Cresa, adds to the chorus of optimism: “In the current situation, we are seeing that enterprises that have e-commerce platforms have been able to limit the negative impact of a pandemic on their companies. Furthermore, in many cases a sharp increase in sales has been recorded. And those companies that didn’t have online channels are now rushing to launch them.”

According to Szymon Gasparski, the industrial and logistics director of consultancy Nuvalu, the e-commerce boom represents the beginning of a long-lasting trend. “Ultimately, the share of e-commerce in the tenant mix of warehouses will continue to grow, as all the goods sold online have to go through warehouses and logistics centres.”

Who will generate the demand?

The current situation will also result in the need for the further diversification of supply and production lines, in order to be closer to the consumer. “Many companies have also reviewed their supply chains and traces of global production, placing more emphasis on securing and protecting the future flow of materials and products,” adds Magdalena Szulc of Segro.

Paweł Sapek of Prologis predicts that the reorganisation of supply chains to fulfil more orders will also add to the demand on the warehouse market. “We expect that in the near future, this demand will be mainly created by companies from the food, medical, consumer products and various retail sectors,” believes Paweł Sapek. Operators from these sectors currently make up around of a third Prologis’ portfolio. “These companies are likely to be the driving force of change right now, because they have already experienced the benefits of e-commerce. In these sectors, e-fulfilment operations represent a relatively small percentage, and so for supply chains to be adequately modernised will require significant investment in the real estate sector,” he adds.

Tomasz Listowski of Cresa points out that structural changes in retail supply chains have been taking place for several years and that Covid-19 has only accelerated them. “Most ‘new consumers’, who have only recently started buying online, will continue shopping in this way, which will lead to growing demand for warehouse space across the country,” he notes.

The experts insist that industrial and logistics developers are ready for new challenges, including those related to the growing demand for warehouses. “For many years there has been strong demand for income-generating industrial and logistics assets, as investors have attempted to diversify their portfolios – in the past they tended to focus on shopping centres, office buildings and hotels. We expect that this demand will shift further to the industrial and logistics assets,” adds Tom Listowski.

Here come the robots

Another effect of the current situation will be accelerating the digitisation of the sector. According to Szymon Gasparski of Nuvalu, automation will now become a priority and the coronavirus effect will speed up many transition processes that have already been initiated. “The robotisation of logistics will make it immune to unforeseen disruptions, such as restrictions related to work safety during an epidemic. Social distancing rules do not apply to robots, automatic cars and mobile shelving. It’s estimated that by 2030 the market for new technology related to automation in logistics will be worth USD 81 bln and by 2040 this will have grown to USD 290 bln,” he says.

These are not the only changes expected in the warehouse sector. Szymon Gasparski claims that the attitude of tenants is also changing – they no longer want to sign long-term contracts and to be tied up for five or ten years. Instead of this, they prefer to arrange contracts for a few months with extension options. “Increased flexibility will change the reality of the market and the rules of the game. Tenants who have had to suspend their operations thus depriving them of income are also expecting this. The pressure they are putting on the owners and operators of warehouse space will intensify. Decisions on extensions or reductions in rental payments will largely depend on the attitude of the banks and institutions financing warehouse investments. One thing is certain - the market will become more flexible and this trend will probably continue, even after the crisis. This represents a challenge for all involved parties – and an opportunity for advisors, whose knowledge can actively help landlords and tenants in reaching a compromise,” explains Szymon Gasparski.

Kamil Szymański, the director of the warehouse and industrial department at Savills in Poland, believes that the coronavirus pandemic has only bolstered trends that have been setting the tone for the warehouse market for some time now. “As a result of the increase in internet commerce, demand for storage space generated by the e-commerce has increased. The momentum towards automation in logistics has also intensified, but with an entirely new emphasis. This provides some protection, from labour shortages and high salaries, but also has the added advantage of being immune to health issues,” he argues. “However, the slowdown, the supply chain problems and the decrease in consumption, if they lasted in the long run, would certainly not be beneficial for the demand for space in this sector,” concludes Kamil Szymański of Savills.

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Radosław T. Krochta

the CEO of MLP

UNLIKELY TO CHANGE US

The pandemic has had little impact on our operations. I can even say that it’s been business as usual for us. All our projects are on schedule, we have signed new lease agreements, we are negotiating new contracts, rents are being paid by our tenants on time. The only thing that has been concerning us is whether we will be able to obtain administrative decisions on time. However, so far all our development projects have proceeded as planned. Since May, the traffic in our parks has returned to its pre-pandemic levels, and some of our clients are even saying that they have more orders. Will the current situation transform the warehouse market? I don’t think so. At the moment, the commercial real estate market, and not only in Poland but across the world, remains almost frozen. The exception has been warehouse development, for which the ongoing crisis is an opportunity to grow. The pandemic has not slowed down or stopped our expansion plans. The demand for warehouse space located close to large cities has been obvious for some time, and now when the sales of online stores are certainly on the increase at the expense of their stationary equivalents, the demand will naturally increase. The biggest winner has certainly been the e-commerce segment. Our goal is to focus on the major European locations – and I believe that with this approach our warehouses will always be attractive to tenants. Warehousing will be one of the few sectors that will emerge from this turmoil in good health.