The more the merrier
That makes the company one of the major players in this market almost immediately upon arrival, which means it will be breathing down the neck of the number one developer in this region, the American ProLogis, in next to no time.
There is a crucial proximity between the two companies which goes beyond simple commercial rivalry, however. Parkridge CE Developments, which has been headquartered in Warsaw since a year ago, is led by Hans van Luijken, once ProLogis vice-president responsible for Central Europe, and Piotr Michalski, another voluntary exile from the US-based developer. But this journey from loyal servants to the company to plotters of its demise is well-trodden. Back in the UK, Parkridge's founder John Cutts himself became a ProLogis employee in 1998 when the latter acquired his Kingspark company, which had been a dynamic forerunner in big shed development in the UK until then. He only lasted three years at ProLogis, however, and in 2001 his entrepreneurial zeal urged him to resign from the corporation to become head of the logistics/retail concern that was Parkridge. Subsequently, he headhunted van Luijken and Michalski from ProLogis here in Poland.
"They almost have the same strategy," says Maciej Chmielewski, industrial associate at Colliers International about the two companies, "in that they're going to build in the most industrial cities such as Warsaw, Poznań, Katowice and Wrocław, but Parkridge's rents will probably be a bit lower than ProLogis', because they'll be trying to carve out a stake in the market."
As it's the largest market Poland will be the site for most of the new Parkridge parks and five will be developed in various parts of the country. Later this month, the company will break ground on the first warehouse in Nadarzyn, near Warsaw, to consist of 15,000 square meters on a 13.5 hectare plot, and has already begun work on a 20-30,000 square meter project in Dąbrowa Górnicza near Katowice. Work on other warehouses, in Wrocław, Września (not far from Poznań) and Piotrków Trybunalski near Łódż will begin in Spring next year.
Parkridge will develop speculatively in these regions because, according to van Luijken, "we have a strong feeling that there will be demand for the warehouses there. It's been proven in the past and will stay the same."
This strategy might be considered bold by other developers in Poland, who are more likely to begin projects these days only when they have secured tenants. They might also express partiality towards one or other area of the country, such as Piotrków Trybunalski, Stryków (near Łódż) or Silesia, for example, and claim it as Poland's next big logistics hub now that demand is spreading beyond the Greater Warsaw district. Van Luijken, however, is dismissive of such arguments. "Developers always talk about locations where they have parks but there's interest all over. Warsaw is still very much top of the list and Silesia and Wrocław are moving closer to that but then so are Prague and Brno. Everyone has their own philosophy of where they want to be. Some customers will want to produce in Poland, the Czech Republic or Slovakia and transport their goods back to the west, or spread out to the east, and some will want to focus on the main market itself, Poland. It's all very diverse."
The number one, however, is focusing its attentions more and more on one particular region of Poland and is doing so speculatively as well. ProLogis began work on a 50,000 square meter project near Katowice last month and has also recently acquired a 32 hectare site in Wrocław for a 150,000 to 160,000 square meter park. "Most of the developments we're starting in 2004/5 are in the south of Poland," says Michael de Jong-Douglas, ProLogis' first vice-president and country officer Central & Eastern Europe.
Of the challenge that his company's former employees are about to mount in the market ProLogis dominates de Jong-Douglas remarks: "I'm actually going to quote Hans from a magazine article that was written when he worked at ProLogis: "We welcome the competition." It's inevitable that as the market develops and becomes more institutional that you're going to get more institutional developers."
Back in the UK ProLogis has been described as the "graduate school for shed developers", (in an article in Property Week) and van Luijken acknowledges the value of his experience at the company, whilst warning that he is planning to knock it off its perch. "We learnt a lot and we did a lot at ProLogis: that's why they're number one. But it's lonely at the top and you need to take heed of what's happening around you."
Whilst de Jong-Douglas accepts that Parkridge will make an important impact on the market, not least because of its ProLogis pedigree, he has fewer words of comfort for other newcomers. "There are some developers who are less likely to succeed than Hans," he says. "They don't understand the infrastructure and they don't understand the planning or the permit process. There are a lot of investment funds coming to the market, some of whom are doing quite well but there are others just here to spend money and I think they're in for a surprise. But for those who've been here for a while, it's going to be a good market even with the competition. I think there's enough business for everyone."
Parkridge will be accompanied in its endeavors in Central Europe by Morley Fund Management, which last month pledged to invest EUR 1 billion in property in continental Europe, a quarter of which is likely to make its way to Poland. "They've known each other for a longer time than we have been involved," says van Luijken, of the relationship between the two British concerns. "Morley expressed a desire to become more involved in Central European investments and it was our wish to have a big investor behind us to support our big plans. The key to success in this market is to build speculatively, build fast and fill up your parks as much as possible."
Such talk of speed is perhaps suggestive of a resurgent dynamism in the Polish market. Some players are more cautious than others but all the indications are that a logistics boom is heading this way some time soon. "There are greater returns in Central Europe compared to Western Europe," says van Luijken. "There's a lot of yield compression to be seen in these markets and although rents are still going down, at a certain point they will start to go up again and that will make everything more interesting than in countries in the west."
Maciej Chmielewski also believes in brighter prospects for the market here: "There's already a lot of activity compared to the last couple of years and accession to the EU will lure many more investors than now. There are a lot of companies interested in Poland because of its cheaper labor, tax incentives and the lower cost of property."
"There will also be a lot of good local companies moving into more modern space," says de Jong-Douglas, "as well as international companies looking for regional consolidation. There will be different kinds of customer and in two to three years' time, there will be strong solid growth in the market."
There is a crucial proximity between the two companies which goes beyond simple commercial rivalry, however. Parkridge CE Developments, which has been headquartered in Warsaw since a year ago, is led by Hans van Luijken, once ProLogis vice-president responsible for Central Europe, and Piotr Michalski, another voluntary exile from the US-based developer. But this journey from loyal servants to the company to plotters of its demise is well-trodden. Back in the UK, Parkridge's founder John Cutts himself became a ProLogis employee in 1998 when the latter acquired his Kingspark company, which had been a dynamic forerunner in big shed development in the UK until then. He only lasted three years at ProLogis, however, and in 2001 his entrepreneurial zeal urged him to resign from the corporation to become head of the logistics/retail concern that was Parkridge. Subsequently, he headhunted van Luijken and Michalski from ProLogis here in Poland.
"They almost have the same strategy," says Maciej Chmielewski, industrial associate at Colliers International about the two companies, "in that they're going to build in the most industrial cities such as Warsaw, Poznań, Katowice and Wrocław, but Parkridge's rents will probably be a bit lower than ProLogis', because they'll be trying to carve out a stake in the market."
As it's the largest market Poland will be the site for most of the new Parkridge parks and five will be developed in various parts of the country. Later this month, the company will break ground on the first warehouse in Nadarzyn, near Warsaw, to consist of 15,000 square meters on a 13.5 hectare plot, and has already begun work on a 20-30,000 square meter project in Dąbrowa Górnicza near Katowice. Work on other warehouses, in Wrocław, Września (not far from Poznań) and Piotrków Trybunalski near Łódż will begin in Spring next year.
Parkridge will develop speculatively in these regions because, according to van Luijken, "we have a strong feeling that there will be demand for the warehouses there. It's been proven in the past and will stay the same."
This strategy might be considered bold by other developers in Poland, who are more likely to begin projects these days only when they have secured tenants. They might also express partiality towards one or other area of the country, such as Piotrków Trybunalski, Stryków (near Łódż) or Silesia, for example, and claim it as Poland's next big logistics hub now that demand is spreading beyond the Greater Warsaw district. Van Luijken, however, is dismissive of such arguments. "Developers always talk about locations where they have parks but there's interest all over. Warsaw is still very much top of the list and Silesia and Wrocław are moving closer to that but then so are Prague and Brno. Everyone has their own philosophy of where they want to be. Some customers will want to produce in Poland, the Czech Republic or Slovakia and transport their goods back to the west, or spread out to the east, and some will want to focus on the main market itself, Poland. It's all very diverse."
The number one, however, is focusing its attentions more and more on one particular region of Poland and is doing so speculatively as well. ProLogis began work on a 50,000 square meter project near Katowice last month and has also recently acquired a 32 hectare site in Wrocław for a 150,000 to 160,000 square meter park. "Most of the developments we're starting in 2004/5 are in the south of Poland," says Michael de Jong-Douglas, ProLogis' first vice-president and country officer Central & Eastern Europe.
Of the challenge that his company's former employees are about to mount in the market ProLogis dominates de Jong-Douglas remarks: "I'm actually going to quote Hans from a magazine article that was written when he worked at ProLogis: "We welcome the competition." It's inevitable that as the market develops and becomes more institutional that you're going to get more institutional developers."
Back in the UK ProLogis has been described as the "graduate school for shed developers", (in an article in Property Week) and van Luijken acknowledges the value of his experience at the company, whilst warning that he is planning to knock it off its perch. "We learnt a lot and we did a lot at ProLogis: that's why they're number one. But it's lonely at the top and you need to take heed of what's happening around you."
Whilst de Jong-Douglas accepts that Parkridge will make an important impact on the market, not least because of its ProLogis pedigree, he has fewer words of comfort for other newcomers. "There are some developers who are less likely to succeed than Hans," he says. "They don't understand the infrastructure and they don't understand the planning or the permit process. There are a lot of investment funds coming to the market, some of whom are doing quite well but there are others just here to spend money and I think they're in for a surprise. But for those who've been here for a while, it's going to be a good market even with the competition. I think there's enough business for everyone."
Parkridge will be accompanied in its endeavors in Central Europe by Morley Fund Management, which last month pledged to invest EUR 1 billion in property in continental Europe, a quarter of which is likely to make its way to Poland. "They've known each other for a longer time than we have been involved," says van Luijken, of the relationship between the two British concerns. "Morley expressed a desire to become more involved in Central European investments and it was our wish to have a big investor behind us to support our big plans. The key to success in this market is to build speculatively, build fast and fill up your parks as much as possible."
Such talk of speed is perhaps suggestive of a resurgent dynamism in the Polish market. Some players are more cautious than others but all the indications are that a logistics boom is heading this way some time soon. "There are greater returns in Central Europe compared to Western Europe," says van Luijken. "There's a lot of yield compression to be seen in these markets and although rents are still going down, at a certain point they will start to go up again and that will make everything more interesting than in countries in the west."
Maciej Chmielewski also believes in brighter prospects for the market here: "There's already a lot of activity compared to the last couple of years and accession to the EU will lure many more investors than now. There are a lot of companies interested in Poland because of its cheaper labor, tax incentives and the lower cost of property."
"There will also be a lot of good local companies moving into more modern space," says de Jong-Douglas, "as well as international companies looking for regional consolidation. There will be different kinds of customer and in two to three years' time, there will be strong solid growth in the market."
