Future-proof quality

Tomasz Cudowski, ‘Eurobuild CEE’: Let’s start with your company’s latest purchase. What are you going to build on the several hectares purchased in Warsaw’s Bielany district? I’ve heard there’s even been talk of a data centre.

Magdalena Szulc, the managing director of Segro, Poland and the Czech Republic: To begin with, let’s start with the fact that our plot lies within the city limits, which also means that a lot more work is required to prepare the project. Currently, we are at the stage of finalising the environmental decision and dealing with the communications and the infrastructure – and that’s probably going to take us a few more months. We are planning to build an urban warehouse centre, but we’re also in negotiations with companies that specialise in data centres. They’ve been showing a lot of interest in this location, so we hope that they are going to join the list of our customers.

Aren’t big projects like this risky for developers these days? The bigger the size and the more complicated it is, the greater the likelihood – at least in theory – that something’s going to go wrong…

This project is big in terms of its area because it is going to be built on a 16 ha plot. But we have been developing large-scale projects for years and always in a sustainable manner. We don’t have so much land in our portfolio to significantly upset our balance sheet, but we have no intention to be building on them all at the same time in the near future. The key thing is to develop in a way that maintains a low vacancy rate. We feel that a lot of speculative development has taken place by other companies lately, which means that it will certainly take a few months for it all to be absorbed and this will alter the balance of the market. But at Segro we are not concerned about this.

So what is Segro worried about?

The biggest challenge this year is the ongoing macroeconomic and geopolitical uncertainty. Crucially, the consultancy forecasts for the coming year are for the demand to remain the same as in 2023. The large volumes of speculative space are going to put a lot of pressure on effective rents because the landlords of this vacant space will be competing with each other intensively over the coming months. However, the overwhelming majority of our new development projects have been secured with pre-leases, so this situation doesn’t affect us.

Just recently, there’s been a lot of contradictory messaging regarding the impact of nearshoring on logistics leases in Poland. Is nearshoring an actual trend or more an article of faith?

I think it is still too early to speak of a trend. Of course, a few major leases have occurred, but these are mainly companies from the manufacturing sector that don’t make spontaneous decisions to relocate countries. Their studies take many months to complete, not to mention constructing and equipping their facilities. Poland has an attractive geographical location, as is often emphasised in all of these studies. We have a highly qualified workforce, low leasing costs and excellent infrastructure. All of these factors have put us at the top of the list of possible nearshoring locations. But, on the other hand, we don’t have any nearshoring projects at Segro right now. Of course, we are looking at this very carefully, since it could represent yet another way for our business to grow in Poland. We are open to future developments that meet the needs of potential clients.

And what about ESG in the warehouse and logistics sector? Is it true that there is indeed no road back from this?

If you’re talking about implementing ESG principles, I believe this is a one-way street and we have to go forward without looking for any side roads. This is particularly so because the European Commission has been forcing companies to take specific action, such as introducing the CSRD directive for reporting. Nevertheless, we will see how these rules are applied, because the market is still learning in this regard. Developers have been applying the main principles of ESG for a number of years already. Among our clients and investors, there is also greater awareness that following the principles of sustainable development is unavoidable. We operate in Poland, which is a relatively young market, so we don’t have to face the challenges seen in the West, where there are many older warehouses. Segro has for many years been building to a higher standard than the regulations require. Last year, we took the decision to certify our older buildings under BREEAM-in-Use, and since 2022 we have made it our responsibility to certify all our new buildings with a minimum rating of BREEAM ‘Excellent’. The preliminary information we have got back from our assessors has in every case been very promising. Our oldest buildings in Poland are around 15 years old, but they were built for us to own and manage within our own portfolio, so even today they fulfil the highest standards. We have always spent a lot of time, resources and effort on creating the highest specification quality and in predicting what the market is going to require in a few years’ time. This strategy will pay off not only today but also in the future.

My next question concerns the hot topic of technology. Everyone is looking to digitise and automate, but not everyone can afford it, particularly now that money is tight. In this regard, can you see any significant progress in the sector?

Segro can certainly talk about our progress in this field. We have been using BIM to construct our buildings for many years, which allows us to control our embodied carbon emissions, for example. When it comes to management, we use BMS systems, which enable us to collect the data for a building and its utility usage, which gives us control over it and allows us to implement solutions to generate savings. We are also steadily applying systems for the comprehensive management of our parks in Poland and to communicate with our business partners. By the end of the year, such systems will operate in all the buildings in our portfolio across Poland. With Segro’s warehouse developments we also have automated registration plate readers for deliveries, but that’s not all. Since such a large number of vehicles come to each location, this also has an impact on the natural environment. So, we are also investing in electric transport and placing electric vehicle charging stations on-site at our logistic centres.

What plans do you have for the near future? Do you have any new projects, regions or market sectors?

In a geographic sense, our activities are not really going to change. We have been operating in key locations for many years and that’s how we intend to continue our activities in the market. Before we purchased the site in Bielany that we mentioned earlier, we bought two sites in Ożarów, where the acquisition of the building permits is at an advanced stage, so we hope to start developing these buildings this year. Not long ago, we also bought an attractive site within the city limits of Wrocław, where we are in the last stage of getting the building permit. We also have a small site in Warsaw’s Annopol district. Currently, there is a building on the site that has to be demolished, but eventually a data centre could be built there. We are also completing two BTS developments – one in central Poland for a courier company and the other near Warsaw for a financial services firm.

In recent talks I’ve had with your competition they insisted that the market still has a lot of room for new players and that there’s a great deal of demand, but if someone is looking to enter the market, they shouldn’t do so this year. What advice would you give to a newcomer to the warehouse market?

Firstly, every company has a different operating strategy. Due to the lack of development activity on the market, now might be a good moment to do so, but – as I mentioned earlier – a lot of speculative space has come onto it recently and you need to be aware of this. A lot also depends on the individual strategy and the costs that a company is able to bear.

But when you go on holiday and you see a huge warehouse bearing one of your competitor’s logos, doesn’t that ruin your mood?

It has absolutely no effect on my holidays. Competition is necessary for every business to develop, so I have a lot of respect for it – and although sometimes it can thwart our plans, the overall effect can only be seen as beneficial. Competition forces us to be active and stops us slipping into a routine. You have to pay attention even when you have superb results because others might have even better ones. Talking about vacations, I have just returned from two weeks in Thailand. It was a very relaxing break with no email or telephone calls, but it was also a challenge of sorts, with having to pack quickly and catch different modes of transport. But I did get to know a different culture. It was a total reset that resulted in me returning with an open mind, more energy and new ideas. It was the best possible form of recuperation – so I’d recommend it to everyone, including the competition.

Twenty years at the top

Magdalena Szulc has been employed by Segro since 2005, when the company first started operating in Central Europe. She started her role as regional director, and from 2008 to 2009 she held the position of country manager. In 2009 she was promoted to the position of Segro managing director for Central Europe. Since then she has been responsible for managing operations in the region and for implementing the company's strategy based on the development and expansion of its logistics and industrial property portfolio in key locations. She has more than 20 years of experience in the real estate industry, confirmed by her RICS certification. Magdalena's areas of expertise include the logistics, warehouse and real estate markets, HR and market trends. Prior to joining Segro, she worked for Siemens and Grontmij Real Estate. She is a graduate of the Poznań University of Technology and the Poznań University of Economics.