Storing up their hopes

The end of the year is a good time to sit down and assess the situation, trying to remain optimistic about what the next year has in store for you. The 11th Warehouse & Logistics market in Central and Eastern Europe conference was no different

Organised by Eurobuild Conferences, the event gathered a large number of the industry's players to the Intercontinental Hotel in Warsaw, the venue for the conference. What was on their minds? Is the sector now out of the woods, as vacancy rates fall in certain areas of Poland and other countries in the region?
Let's look at the figures first. Cushman & Wakefield's data shows some positive signs - in Q2 vacancy rates declined in Poland, the Czech Republic and Slovakia, with Hungary being the only exception, where vacancy rose from 19.5 pct in 2010 to 21.8 pct in Q2. Poland, moreover, has been driving the change with a take-up of 941,000 sqm at the end of the first half of the year. By comparison in 2010 take-up amounted to 1.4 mln sqm. What are the reasons for this? "The low rents are encouraging the continuing leasing activity on the market," observed Renata Osiecka, a managing partner of AXI Immo Group. According to Magdalena Szulc, business unit director for Central Europe at Segro: "Currently firms are fighting for the market using the lower rent argument." The fact that tenants are seizing the moment to go ahead with relocation plans is certainly adding more problems to warehouse facility owners. The aftermath of this is more space available for lease. As tenants are still in a position to get more for what they pay for, another issue has returned to the market - rents paid in Polish złoty. Renata Osiecka agreed there are more inquires about such rents, but "we are unlikely to see a wave of projects offering such rents." Paul Deverell, the business director of CTP, added that the situation on the Czech market remains challenging, with ongoing pressure on rents. "We also own plots in Slovakia and Romania, but for the time being we have put on hold our planned projects in these countries," he revealed.
In such hard times, developers have come to appreciate more the BTS concept. Or have they? With the exception of 2010, the number of BTS projects has been steadily rising, with almost 250,000 of space delivered in the course of the first nine months of the year. "Actually we thought we would get more for BTS projects than for other schemes, but interestingly enough the opposite has happened," noted Ben Bannatyne, Prologis' managing director for Central and Eastern Europe. Kris Verbruggen, the managing director of Univeg Logistics Poland, is a big supporter of BTS projects as "it is too expensive to adapt an existing building to our specific requirements." Robert Dobrzycki, the managing partner for the CEE region at Panattoni Europe, made this point abundantly clear: "The thing about BTS projects is that they can be more risky than speculative schemes, especially if the contract is way too specific."
Tenants are not only looking for savings, but for growth. It is very likely that they will find this in the CEE region. "There are cheaper countries, but Poland remains attractive for foreign investors. The crisis in Western Europe has resulted in more investments here," claimed Marcin Włodarczyk, the director of the investor service department of the Łódź Special Economic Zone. More investors, this time intitutional, are also looking at the regional warehouse market, as there are more quality products available for purchase. The long leases also make the deal sweeter. "It is hard to find offices with such long leases," explained Alex Tilson, the investment manager of NBGI Private Equity, and other participants of the investment panel discussion agreed that the investment market is set for a change. From the atmosphere in the room it was clear that it is a positive change that market players are expecting. (MP)