Big bucks for big boxes
According to Colliers International, new supply on the warehouse market was some 430,000 sqm in 2005, but international developers are confident that there is room for more.
With its central location, both in geographical and prestige terms, Warsaw's share in the market is still dominant. With 270,000 sqm of supplied space, it is Zone II (15-30km from the center) that remains the most attractive location in the capital. Despite being located relatively close to the city center, warehouses built in Nadarzyn or Błonie offer rates similar to regional logistics centers. It is expected that Zone II will retain its leading position in 2006.
Zone I is usually preferred by local distributors of high-value products, such as electronic or cosmetic goods, which only need warehouses of 500-3,000 sqm. In 2005 the demand for space in this zone was 54,000 sqm. The vacancy rate for the whole of the Warsaw market was 13.4 percent, with the highest figure recorded in Zone III. Colliers International's specialists say this is an indicator of the strength of the market, since developers are trying to complete new projects to satisfy the high demand.
Regions rising
Last year also saw a growth in logistics facilities on the local markets. "Warsaw's and regional locations' market shares are changing, to the benefit of the latter," said Rafał Bochenek, the country manager of warehousing developer Eurinpro.
Firms are taking advantage of the lower labor and property costs and attractive tax rates in the regions, and are now more eager to serve both local and international markets from locations such as Wrocław, Katowice, and Poznań. In Wrocław, for example, warehouse space grew from 15,000 sqm at the beginning of 2005 to 120,000 sqm at the end of the year. What makes Wrocław such an interesting location, for example, is its vicinity to the German and Czech borders, which is a major bonus for logistic operators.
Due to scarce demand for space servicing the Ukrainian and Belarus markets, warehouse space in the east and north of Poland is very limited, although growth can be expected along the Baltic coast in the Tri-City area, in connection with the new container port construction in Gdańsk. The scale of investments, however, could be obstructed by uneven land, which is characteristic of the region. This could make land prices in quality plots 50 percent more expensive than in other regions.
Poland's potential
Reports show that Poland offers the most developed warehouse market in Central and Eastern Europe. The country has large areas of undeveloped, flat land that is much cheaper than in the Czech Republic or Slovakia. In most Polish cities, at least three international developers, mostly Prologis, Parkridge CE, and AIG Lincoln, have already made their presence felt. Rates are also very competitive, with A-class warehouses costing EUR 3 (zł.11) per sqm per month.
Despite the fact that investment in warehousing is only a small section of the total R2.6 (zł.10) billion spent on real estate, almost half of the total value of foreign-direct investment in Poland went into production and distribution operations. Most of these projects were developed in the Special Economic Zones, which offer a number of incentives for investors, such as tax breaks of 50 percent of the investment cost.
"This year we will also see a growth trend. The amount of new leased space will be either similar or bigger than last year," said Bochenek. "Yields will approach European levels, whereas rents will remain stable and still attractive." Yields are currently about 8.5 percent in Poland.
New kid on the bloc
Asked about the main stimulus in the Polish warehousing market, analysts are unanimous on one point: EU accession. "European Union membership in 2004 has given a huge push to the Czech Republic, Hungary and Poland. These countries are benefiting from the continuing move of European production from Western Europe and the expansion of the region's logistics markets, helped by the region's low costs compared with Western Europe, the growth of the retail sector in these new member countries, and their improving transport networks," says Ferdinand Hlobil, the head of Central European Industrial & Logistics at Cushman & Wakefield.
Poland's accession to the EU also encouraged Euripro to invest in the country. The firm opened its office in Warsaw in December 2004 and is now building a warehouse in Grodzisk Mazowiecki for the Gefco company. The company has also announced it will develop further projects outside Warsaw. "Potential locations depend on the motorway network," says Bochenek, indicating that the company is looking for sites along the A4 motorway.
Threats from the west
According to Bochenek, Poland's position on the CEE warehousing market will strengthen, not only due to the low land cost but also thanks to low labor costs and improvements in infrastructure. What he warns against is the reviving significance of eastern Germany on the warehouse market. "It is difficult for Poland to compete, when it comes to the areas on the German border. The incentive system and the infrastructure is still better there."
"Poland has to fight to bring back its competitiveness," says the chief operations office at Eurinpro, Danny Peeters. He complains about Poland's poor infrastructure and opaque administration system. "Quite a number of companies want to set up their their business there but few complete projects," he observes.
Still, analysts remain optimistic and believe that the number of investment transactions in the warehousing market will increase. Not only are there more and more developers appearing on the market, such as Grontmij Real Estate, but new formulas are also being offered, such as self-storage warehouses.
