We use cookies to make sure our website better meets your expectations.
You can adjust your web browser's settings to stop accepting cookies. For further information, read our cookie policy.
SEARCH
IN Warsaw
Exchange Rates
Warsaw Stock Exchange - Indices
The Warsaw Voice » Real Estate » February 27, 2015
The Real Estate
You have to be logged in to use the ReadSpeaker utility and listen to a text. It's free-of-charge. Just log in to the site or register if you are not registered user yet.
A Good Year for Prologis
February 27, 2015   
Article's tools:
Print

Paweł Sapek, Senior Vice President and Country Manager for Poland at Prologis, talks to the Voice.

How do you assess last year on the Polish warehouse market?

2014 was a very interesting period for the warehouse real estate market. Growing demand encouraged developers to build new speculative projects. Of course, the market was still dominated by BTS [build-to-suit] projects, which were developed on key domestic markets where available space has run short. Five regions were still the focus of interest: Central Poland, Warsaw, Poznań, Upper Silesia, and Lower Silesia. Smaller sub-markets were also active, like Szczecin and Gdańsk, with a number of smaller investment projects.

Considering the current market situation, in which demand for warehouse real estate in some locations exceeded the supply amid low capitalization rates, we should expect rents to grow, just as happens on any mature market. Unfortunately, Poland has recently seen a trend that causes rents to stop growing or even fall, which is an anomaly of sorts.

Pursuing a short-term strategy focused on real estate turnover—which means building and selling a facility and making a profit within a short time in order to achieve rapid commercialization of a project—developers are able to offer tenants low rents that they often make more attractive with extra discounts. These rates are often significantly different from the normal market level and put in question the profitability of such projects. The pressure exerted by developers means that players with a long-term strategy are forced to adjust their rents to the current low level in order to maintain their pace of development.

With the present size of the Polish market, just a few investment projects based on discounted rents can affect the whole sector. In the longer term, the constant lowering of rents can lead to a decreasing number of new projects.

How did the Polish market develop compared with other countries in the region and the EU as a whole?

In 2014, the Czech Republic and Slovakia were the most stable markets with a good level of demand, sensible market-level rents and limited supply. In recent months we also witnessed an improvement on the Hungarian market, specifically in Budapest, and we expect this trend to continue in 2015. Although quite a lot was going on in Poland, especially in Wrocław and Poznań, the situation in other Polish sub-markets is more difficult, chiefly because of the pressure being put by developers on reducing effective rents.

Did Prologis achieve its planned results?

We are happy with the results of our operations last year, which increased Prologis’ portfolio in the region by 525,000 square meters to more than 4.1 million square meters. Last year we completed six projects with a total space of 127,400 square meters, including two speculative buildings in [warehouse] parks in Wrocław. Another two speculative projects with a total space of over 56,000 square meters are currently being built in Prague and Bratislava. Other works in progress include three BTS projects, for CERVA and Mall.cz in Prague and DB Schenker in Hungary, with a total space of almost 70,000 square meters.

In 2014, we also acquired 27 buildings with a total area of more than 390,000 square meters in Poland, the Czech Republic, Slovakia and Hungary. The total transaction cost was about 225 million euros. Importantly, these logistics facilities were purchased for a price lower than the replacement costs.

2014 was also a record year for Prologis in terms of leases. In Central and Eastern Europe we leased over 1.8 million square meters of distribution space, the most since 1997 when the company’s presence in the region began.

Will the upturn on the warehouse market continue this year?

We think that the revival on the warehouse market will be maintained in 2015, so we expect more speculative projects to appear on the market. Analyzing the vacancy rates, we can say that in the near future warehouses will be built in regions with a shortage of available space, namely Poznań and Lower and Upper Silesia. As I mentioned earlier, other areas, like Szczecin and Gdańsk, will also be active.

We hope that rents will go up soon, especially in regions where the supply is limited. Continuing the present situation would have a negative impact on the entire warehouse sector in Poland.

What sectors will create demand for warehouse space?

The e-commerce sector has had a growing share in the volume of leased warehouses, and this sector continues to develop. Its increasing popularity is having a significant impact on all aspects of the logistics sector’s operations, including the strategic location of order processing centers and the total area of occupied real estate. Although e-commerce companies rent only 10 percent of space globally, this figure has doubled over the past three years and will definitely not slow down because sales generated by e-commerce are growing by 20 percent annually.

Besides e-commerce, retail chains have a leading share in warehouse commercialization. Automotive companies are also becoming more active, often choosing locations where they can form clusters with their subcontractors, suppliers or customers, enabling them to cut delivery times to a minimum.

Will the Ukraine-Russia conflict affect the decisions of investors on the Polish warehouse market?

We haven’t seen any negative impact from the Ukraine-Russian conflict on the Polish warehouse market, especially since the main regions of activity for logistics developers are in central and western Poland. Nevertheless, this conflict is sure to have an impact on the volume of transactions of companies operating on Eastern European markets. We suspect that many contracts have been annulled or frozen for a time.

What plans does your company have for this year?

We will continue to seek opportunities for expanding our portfolio across Poland and Central Europe, concentrating on key markets. The main objective will still be to increase the occupancy rate in our buildings and build speculative and BTS projects based on our land bank. We will keep looking for opportunities to acquire existing warehouse parks that increase the value of our assets. The main driving force of Prologis in 2015, however, will be the construction of new projects.
© The Warsaw Voice 2010-2018
E-mail Marketing Powered by SARE