Cautious optimism

JLL has introduced a new service for the tenants of industrial and warehouse space to find them the best locations for distribution centres. What’s new about this?

This meets the needs of our clients who see the role of a distribution centre not just as a way to improve deliveries but also as a way to cut supply chain costs and limit their impact on the environment. By using advanced analytical tools and our knowledge of the current market, we are able to recommend the optimum location in regard to costs and also in regard to availability. Our experience has shown us that relocating a warehouse can bring annual savings of several million, mainly through reducing transportation, labour and leasing costs.

Does the development of your new service demonstrate that the warehouse sector is still doing well? Can the sector’s operations still be improved?

Despite the external troubles, the warehousing sector continues to show stable growth and the current demand gives cause for cautious optimism. Nonetheless, this is not a sector free of challenges, and one of these is the rising cost of transport. Additionally, with the expansion of retail chains and e-commerce as well as rising consumer expectations, pressure is growing on supply chains in regards to delivery times. They need to be optimised to ensure they remain competitive and profitable for retail businesses. The sector also has to meet the rising demands of ESG and requires greater automation.

After the boom of 2021-2022 followed by the slowdown in 2023 and the better results of this year, what is your forecast for the following months? What should we be expecting?

Despite the demand being down in 2023 on previous years, the tenant activity on the logistics and industrial market remains high. The Polish market is characterised by its strategic location in Central Europe, its competitive operating costs, its access to modern space that meets the highest environmental criteria and its highly skilled labour force. The key factor behind the demand is definitely the rise of retail sales including e-commerce. Poland is also in a good position to benefit from the trend of nearshoring whereby manufacturing is relocating from the Far East to Europe, nearer to consumer markets. From the point of view of developers and investors, the expected reductions in interest rates in both the US and the eurozone are a big factor behind the profitability of their investments and in the long run they could affect how high their capitalisation rates are. With rents expected to rise, this creates good conditions for a further beneficial rise in supply.

Is this only for warehousing? What does a strategic advisor also believe is worth paying attention to? What’s worth investing in?

I’m seeing more investors becoming interested in so-called alternative assets, which will soon only be alternative in name. I’m thinking about the growth of data centres, student accommodation and senior housing, which when well located and sensibly commercialised can produce attractive rates of return. It’s worth watching this last sector because, although it currently has too few operators, it has huge growth potential as a result of Poland’s demographics. Currently, real estate owners can also raise their earning by such measure as optimising parking space.

You have been working in this market for the last 15 years and all in the same firm. Congratulations! How much has Polish real estate changed over this time?

Most importantly, the market in Poland has matured. 15 years ago, the saturation levels for retail and office space were so low that almost any sensibly planned project was guaranteed to be successful and the supply of new space was growing in double figures. Currently, growth is more about quality than quantity. Tenants have also become far more aware, so real estate users often have precise expectations regarding the quality of their space, their location, and their relationship with their landlord. The market has become much more professional. Over this time thousands of new teams have been trained and they now operate on this market, including in financial institutions and real estate corporations. As a result, they expect much more from their consultants and this results in the need to continually look for new tools and solutions to meet the ever more complex challenges of our clients.