When the stakes are higher than the rents

The business breakfast organised by Prologis and Eurobuild CEE took place in an informal atmosphere, with a few delicious servings of regional delicacies. But despite this, the topics under discussion tended to generate a good deal of heated debate. The first of the two panels was focused on the rising rental rates of logistics properties and how tenants could be helped to cope with this.

“The costs of renting warehouse space make up between 5 pct and 10 pct of total supply chain costs. The highest costs are for transport and labour and that’s why it’s so important to plan out the distribution network in the right way – and logistics centres play a crucial role when it comes to the operating costs. Well-planned and cost-effective supply chains often represent a significant competitive advantage due to the positive effect they have on the financial performance of our clients,” argued Paweł Sapek, the senior vice-president as well as CE and country manager of Prologis. When planning the leasing of warehouse space, not only do you have to take the rent level into consideration but also service charges and utility costs. The disruption to the gas and electricity markets and huge price hikes for utilities on the TGE exchange a few years ago led Prologis to pursue a proactive policy when buying electricity and gas. The company is a large purchasing group and buys 123,000 MWh of electricity a year as well as 143 000 MWh of gas for use in its properties. On such a scale it is possible to negotiate beneficial terms. “Over the last few years, rents in Poland have remained highly stable, unlike in other European countries. Despite this, the Polish market has continued to attract investors – the lack rent rises has been compensated for by steady yield compression and investment returns that remained attractive, especially when compared to mature Western markets, like France or Germany, where there is much more availability in terms of warehouse product. In our favour we had strong demand, a quick development period and record high supply,” explained Joanna Sinkiewicz, a senior director and the CEE head of industrial and logistics at CBRE. Investor sentiment then changed: the pandemic and the post-pandemic situation resulted in additional costs and the war broke out in Ukraine. Yield compression stalled and upwards pressure was put on rents. The market data for Q1 2022 already show a rise in headline rents of EUR 0.2–0.5 per sqm (according to the region) and this trend is likely to be maintained over the next few months. “It’s hard to say today how far rents will really rise, since we are still in the middle of this process and the lack of stability prevents us from making accurate estimates. Market experts are generally of the opinion that rents could change by around 15–20 pct, but more data will become available to us over the next few months,” Joanna Sinkiewicz pointed out.

The second discussion panel was dedicated to Prologis Essentials – a unique tool developed by Prologis to provide significant help and support to its tenants in running their businesses. “Prologis Essentials is our response to our clients’ needs in fitting out their warehousing space. Our clients value ease, speed and competitive prices – and we are able to provide them with all this due to our global scale and our partnerships with the best and most trusted suppliers. Prologis Essentials guarantees a range of benefits, from competitively-priced tailored solutions to free consulting and support throughout the entire servicing process. This is a solution we offer both to our new clients and to those who need to change, modernise or reconfigure the equipment they have used till now,” revealed Michał Czarnecki, the head of capital deployment and leasing at Prologis. Prologis Essentials offers a comprehensive service to help configure and optimise warehouse tenants’ operating equipment. “The key items of equipment that allow our tenants to make maximum use of their warehouse space include forklift trucks, elevators, pallet trucks and shelving systems, while the solutions that ensure their safety include LED lighting with motion detectors as well as access to daylight. Such a lighting system results in lower energy costs and reduced CO2 emissions, but it also improves safety standards,” insisted Michał Królik, a Prologis Essentials solutions associate.

The entire meeting was held in a pleasant and yet creative atmosphere. And at the end of the breakfast, each of the guests was presented with a special memento – a unique Lego set of a warehouse building for them to construct themselves. Hopefully, this will show that warehouses are not only easy to put together, but that doing so can also bring great pleasure and a lot of satisfaction.