By Martin Sobczyk
WROCLAW, Poland--Next to Germany but with much cheaper labor,
Poland is attracting more major distribution centers now that
transport links with the rest of Europe have been upgraded.
Amazon.com Inc. last year opened fulfillment centers near the
southwestern Polish city of Wroclaw and the western city of Poznan.
The centers that service mostly the German market sit near highways
running through Poland to neighboring Germany.
Some 600,000 square meters (720,000 square yards) of logistics
space were under construction at the end of the first quarter,
according to U.S.-based property manager CBRE Group Inc. When
completed, that development will increase the total stock of modern
logistics space in Poland to nearly 10 million square meters.
Last year, one million square meters were added to the market,
the largest number since 2007. Construction is going on in nearly
every region of Poland now. In the past, development primarily took
place in central and western parts of the country.
The biggest companies in the market are San Francisco-based
Prologis Inc. and London-based Segro PLC, which each own about a
quarter of Poland's industrial supply. Other major players include
Logicor, a European industrial space landlord controlled by
Blackstone Group LP.
These developers--who lease or sell space to retailers such as
Amazon, French retailer Intermarche or Germany's Volkswagen
AG--have lately been enjoying strong demand. In the first quarter
of this year, some 640,000 square meters of logistics space was
leased in Poland, up 30% in annual terms, according to a report by
the Polish unit of CBRE. Most of the leases were for new space and
expansions while about a third were extensions of existing leases,
with demand driven by logistics firms and e-commerce.
Amazon said it would open a third center in Poland this year
because of strong customer demand in Europe. The company said its
decision to place the centers in Poland was due to the proximity of
the German market, which it serves using the Amazon.de website.
The Polish industrial space vacancy rate declined to 5.6% at the
end of the first quarter, from 5.8% in the fourth quarter of 2014.
"It's the lowest vacancy rate in 10 years," said Magdalena Szulc,
director at the Polish unit of Segro. "It encouraged developers to
start new investments, sometimes of speculative nature."
Improving roads and the availability of skilled workers in the
largest emerging economy of the European Union are among the key
factors that lure operators to build warehouses as well as business
outsourcing centers here.
"What you see is maturing of the Polish market on the back of
its economic performance over many years," said Philippe van der
Beken, managing director for continental Europe at Goodman Group,
which owns the Amazon-occupied site in Wroclaw.
Poland has more than tripled its economic output since the
collapse of communism in 1989, when it was an economy in tatters
following decades of central planning. After the country joined the
European Union in 2004, it gained access to billions of dollars
worth of the bloc's development funds for less affluent member
states. Much of that money has gone into transportation
infrastructure.
Bad roads were a perennial problem for Poland until the
EU-funded buildup, which saw the length of modern highways and
expressways rise from 670 kilometers (415 miles) in 2004 to more
than 3,000 kilometers now. While still rudimentary, the network
allows trucks to quickly drive between Poland and Germany, two
heavily interdependent trade partners.
The boom in Poland's industrial property sector also is being
fueled by rapid growth of online shopping. This has increased
demand among retailers and big online companies like Amazon for
distribution space closer to population centers so they make
deliveries quickly.
Besides new development, there has also been a surge in
investment activity. Investors purchased EUR884 million ($993.4
million) of Polish industrial property in the 12 month period ended
in the first quarter of 2014, compared with $706.9 million in the
year ended in March 2013, according to data firm Real Capital
Analytics.
"The last two years were record years in terms of industrial
space. Never before has Poland seen so much demand and
transactions," said Blazej Ciesielczak, regional director for
Central and Eastern Europe at Goodman.
Increasing investor interest has driven up prices. In the first
quarter of this year, the average price paid for Polish industrial
space was a record EUR1,133 per square meter, compared with EUR708
per square meter in the first quarter of 2014, Real Capital
said.
PZU, Poland's largest insurance company, entered the logistics
segment last year. The insurer bought a portfolio of four logistics
centers for about EUR140 million as it seeks to diversify its
assets away from Polish government bonds that yield about 3% for
10-year maturities with Poland's main interest rate at 1.5%, the
lowest level on record.
"Changes in the trade sector impact what's going on in
logistics. We're heavily engaged in this sector and plan further
investments," said Wojciech Pisz, director of real-estate projects
at PZU's investment arm.
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