Slicing up the warehouse pie

The impressive growth of the warehouse market in Poland has naturally led to an increased geographical diversification of the major logistics locations in the country. While the Warsaw area, Silesia, Poznań, central Poland and Lower Silesia remain by far the largest and most important markets, a number of interesting alternatives have emerged on the Polish logistics map in recent years. “The development of such emerging markets often starts with the construction of BTS projects, that is, those that meet the requirements of a given tenant and are fully occupied by that tenant,” explains Wioleta Wojtczak, the head of research at Savills in Poland. Several boxes need to be ticked for a location to evolve into a growing regional market. “For developers planning warehouse projects, good transport infrastructure, a well-developed labour market and the quality of the available land – both in legal and infrastructural terms – are the key criteria,” comments Tomasz Mika, the head of the industrial department at JLL in Poland. He adds that when it comes to tenants, the financial conditions offered by the developer are also crucial. “Although the road infrastructure has been improving and more and more areas have access to modern expressways and motorways, there are still regions that are clearly preferred by investors,” claims Radosław Krochta, the president of the management board at MLP Group. In his opinion, this shows that a number of other key factors, including the proximity to retail outlets and easy access to a qualified workforce, also play a major role in the process of selecting a logistics location. Robert Dobrzycki, the CEO of Panattoni Europe, stresses that the selection of a logistics location is a very complex process that depends on the sector the particular tenant is active in. “The criteria used by automotive sector companies are very different from the criteria used by food retailers. A location that is perfect for e-commerce sector companies, who are keen to be close to their clients and to be able to fulfil orders as fast as possible, may not be suitable for tenants who only need to store goods,” he points out. He adds that when it comes to production facilities, the locations within special economic zones are of particular significance.

Port-centric logistics

The TriCity and Szczecin in northern Poland are among the locations that have been increasingly attracting investor attention of late. The latter market has been benefiting from, among other things, its proximity to the German and Scandinavian markets. The recent decision of Zalando to commission a 130,000 sqm logistics centre in Szczecin is evidence of the growing popularity of this part of the country among warehouse tenants. For its part, the TriCity has been growing in significance thanks to its port-centric logistics opportunities. According to CBRE, Szczecin, which is one of the youngest regional markets in Poland, offered 180,000 sqm of existing logistics space at the end of H1 2016. Approximately 20,000 sqm was leased in this market in the first half of the year. The TriCity market, which began to develop earlier than the Szczecin market, contained 330,000 sqm of existing logistics space at the end of June, with another 80,000 sqm under construction. “In the first half of 2016, lease transactions for around 50,000 sqm were leased in the TriCity, which shows that the market is more stable than the Szczecin market,” says Michał Żelazek, an associate director in the warehouse and industrial department at CBRE. Goodman, which currently manages a portfolio of more than 700,000 sqm of industrial real estate across Poland and is, apart from the core markets of Warsaw, Wrocław and Kraków, also present in some of the emerging locations in the country, regards northern Poland as one of the fastest-developing and most promising local markets. “Owing to the well-developed infrastructure, the TriCity is well connected with other major Polish cities and with Germany. Moreover, the development of the TriCity is being driven by the expansion of its ports, where clients can import or export products to Scandinavia and even further afield – to Asia, for example. This attracts customers and stimulates additional demand for logistics space,” says Maciej Madejak, the head of business development at Goodman. The developer has been strengthening its presence in the region, having recently fully leased out the 51,500 sqm Pomeranian Logistics Centre (PLC) in Gdańsk and begun the construction of an additional 15,800 sqm within the complex. “The location of the PLC near the Deepwater Container Terminal Gdańsk, the largest deep-water container terminal on the Baltic coast, provides a unique opportunity for the development of port-centric logistics. This allows our customers to combine their logistics and production activities with the services offered by the port,” adds Maciej Madejak. Indeed, as Robert Dobrzycki points out, the TriCity is the only warehouse market in Poland that offers direct access to the Baltic Sea and its ports. However, not all developers share this optimism about the potential of northern Poland. According to MLP, the demand for warehouse space in the region still remains at a relatively low level. “We are not seeing any signs that would indicate that this is going to change over the next years,” stresses Radosław Krochta of MLP.

Eastern promise

Meanwhile, Lublin and Rzeszów in south-eastern Poland have started to attract warehouse investment in recent years – at the end of H1 2016 there was a total of 340,000 sqm of such space in the two cities with another 50,000 sqm under construction, according to CBRE. “In 2015 a combined 140,000 sqm was leased in both markets, whereas in H1 2016 lease transactions for a total of around 40,000 sqm were signed, which shows the instability of the demand there,” comments Michał Żelazek. Białystok in north-eastern Poland is now also being viewed as a potential location for future logistics projects, “but the transaction volume there still remains at a very low level, with the demand being, to a large extent, satisfied by local investors,” he adds. “We continue to see eastern Poland as a region that has a lot of potential when it comes to the development of modern warehouse space. The logistics park project near Lublin we launched two years ago was a test scheme devised to help MLP assess the real demand for warehouse space in the region,” says Radosław Krochta, adding that for the time being the company views the demand in the Lublin area as insufficient – but he also believes that, sooner or later, a logistics boom will start there too. “We are prepared to benefit from it when it does,” he states. Maciej Madejak claims that Lublin is already benefiting from the improvement in roads infrastructure that allows businesses to service clients based in western and eastern Poland as well as in Ukraine. Goodman has developed a warehouse project of more than 33,300 sqm in the city, which has already been leased out. “Goodman intends to expand the centre and construct a second warehouse with over 17,000 sqm,” says Maciej Madejak. Panattoni is also active in Lublin and Rzeszów, and is planning to enter the Białystok market in the near future. “Rzeszów has become particularly interesting for investors, due to the completion of the A4 connecting eastern and western Poland. This is a perfect location for companies that operate across Europe,” says Robert Dobrzycki.

Medium-sized opportunities

Several other medium-sized cities in other parts of Poland have recently emerged as increasingly important logistics locations. These include Bydgoszcz and Toruń (both located in Kujawsko-Pomorskie province), which can now boast a combined 160,000 sqm of existing logistics space, according to CBRE’s data. “While no modern warehouse building was developed in the region in 2015, 10,000 sqm was delivered in H1 and 30,000 sqm was under construction at the end of June,” says Michał Żelazek. He adds that the demand grew from around 70,000 sqm last year to 110,000 sqm in the first half of this year. According to Robert Dobrzycki, these locations benefit from their good transport links with other parts of Poland and the fact that they offer better access to a qualified workforce than mainstream locations. In his opinion, Bydgoszcz is an attractive location for production facilities, whereas Toruń is more suited to house distribution parks. “Opole in south-western Poland attracts tenants who want to be close to the German market and can be an alternative to the saturated Wrocław region,” claims Robert Dobrzycki. Tomasz Mika of JLL points out that two major transactions were signed for space on the Bydgoszcz warehouse market in the first half of the year – Kaufland leased 45,000 sqm (the largest lease deal signed this year), while Carrefour took up 38,200 sqm. “The Bydgoszcz/Toruń area has become an interesting location for retail chains,” says Tomasz Mika, but cautions that “while the emerging warehouse locations are set to grow and attract the interest of tenants and developers, most companies in the sector will continue to be focused on the ‘big five’ markets of Warsaw, Silesia, Poznań, central Poland and Wrocław. Nothing is going to change in this regard.”