Panattoni Europe has been in Poland for 11 years. In that period, it has been developing the largest projects in the region of Central and Eastern Europe. These include three facilities built for Amazon in Poland and the Czech Republic, each with an area of over 120,000 sqm. The company, however, does not intend to stop there.
Warehousefinder.pl: Panattoni Europe has been operating on the Polish market for 11 years. How has the company been throughout these years?
Robert Dobrzycki, Chief Executive Officer Europe, Panattoni Europe: Since 2005, we have delivered 3.7 million square metres of space to more than 320 clients in Europe, with2.97 million sqm delivered in Poland alone. I think that these numbers attest to our quite significant achievements during all these years on the Polish warehouse market. At the same time, together with Amazon, we finalised a record-breaking lease of warehouse space in the CEE region, which we also consider to be a success.
Was it one of the biggest challenges the company had to face?
It should be noted that this lease not only broke records in Poland, but also in Central and Eastern Europe. Each of the facilities developed by Panattoni Europe for Amazon reached a total space of over 120,000 square metres. Around 90,000 sqm of that is warehouse space, while the two-level office section in each of the centres has an area of more than 9,000 sqm. Each of the investment projects had an average of 500 people from 50 various sectors working on its development. This was a really large and important lease transaction, unprecedented for both the development industry and the Polish economy.
It was you who introduced Panattoni into Poland. In your opinion, how has the Polish market changed in all these years?
When we started 11 years ago, there was just a single major player with a huge portfolio on the market. Today, the warehouse space market is much larger, and growing very fast. Virtually every quarter brings record-high results. I would like to point to the recent JLL report, which tells us that the first three months of this year saw the conclusion of lease contracts for a total of 680,000 sqm of space. This is the best result in 10 years. In total, Poland has now more than 10 million sqm of modern warehouse space. This is truly an impressive number.
What helped to achieve such growth?
One of the major factors was the improving infrastructure. It helped to connect and open up new locations, creating what could be called submarkets. New areas that are perfect for the warehouse and industrial market have been created along the new motorway routes. At the same time the older large locations have shifted their structure and started to focus more on supplying cities. We owe a lot to Poland’s geographical location. We are a large flat country at the intersection of major European transport routes. One of our advantages is the proximity of Germany – the country that drives the entire European economy. There is no denying that these factors contributed to the revolution that has been taking place on the Polish market in the last 11 years.
This revolution, however, must have changed your strategy. How has it been evolving?
When we started our operations, we focused on five key markets. We began with regional markets such as Poznań. As soon as in 2006, Panattoni Europe set the industry record for a warehouse space lease, with a 52,000 sqm development for H&M in Panattoni Park Poznań. We were also active in Silesia and in Wrocław, while later we moved on to Warsaw. Today the situation is a bit different. We are trying to explore new locations and look for new places that would be interesting for our clients. Currently, we are present in virtually every area of the country, on all major submarkets. However, we do not stop there, as we try to open up new locations that did not attract that much interest until now.
Panattoni is probably the only developer in Poland with a separate unit whose task is to look for new prospective locations.
We have created a dedicated team of experts who are supposed to address this sector. Their task is to launch parks in new locations that have not had any logistics presence up to this point. We try to look for potential in those areas of Poland that have not been considered by others yet.
Is the search for new markets motivated by the depleting potential of the key markets?
Large cities and major markets are doing perfectly well, but we set out to keep expanding our company. This is why we want to find new places, go deeper into Poland and discover new locations. Up to this point, these areas had no modern class A objects, which are now a standard that is expected by tenants. In each of these cities, there is a group of clients who are waiting for space that is secure and properly equipped, while facilitating both logistics and technological processes. The vacancy rate in the warehouse market is decreasing rather than increasing. This is what makes us happy and motivates us to take action.
What cities do you have in mind when speaking of new locations?
Bydgoszcz, Szczecin, Rzeszów and Lublin. In recent years, the latter has been growing very rapidly. Significant investments made in the development of infrastructure make Lublin and the surrounding area a perfect location for potential investors. Currently under construction is the express route S17 that will connect the Warsaw agglomeration with the Lublin area, as well as with the country border in Hrebenne in the more distant future. This location attracts not only clients who need warehouse space, but also companies that are looking for new production facilities. This is also a result of the availability of skilled workforce. In the case of Lublin, the role of competent employees is invaluable – let us not forget that Lublin is a university city with considerable potential that is complemented by competitive labour costs and most importantly, the support of local investment promotion agencies and municipal authorities.
Do you think about other undiscovered markets as well?
Yes. In the future, we will certainly witness the growth of Opole, Zielona Góra and even Białystok.
However, in order to develop in these locations, you would need a land portfolio. How is Panattoni Europe doing when it comes to acquiring land?
Very well. Land is a key element of our business, so we are always working to expand our land portfolio.
Do you respond to the demand or do you rather try to stay ahead of your clients’ expectations and prepare the land in advance?
We try to acquire plots much earlier than they are actually needed. This is what our offer is built around. We strive to readily provide our clients with solutions, instead of only looking for them when they are needed. Of course, that is something that we cannot avoid when the client’s expectations with regard to the location are very specific and their needs cannot be anticipated. However, in most cases, we are well-prepared for the enquiries we receive. This is a major advantage of our company.
Has the new agricultural act that has been in force since the end of April this year made it more difficult to look for particular locations?
The new law certainly isn’t very helpful; we have already seen a decrease in demand. Thankfully, we have already been working on expanding our land portfolio much earlier.
One of the major pillars of your activity is BTS, that is “tailor-made” space. Why is this form of development so important to you?
This is because we focus on our clients and strive to be in touch with their needs. The BTS developments in our portfolio are a form of activity that describes us very well – the client is always the focus of our attention. This is where Panattoni Europe distinguishes itself from other developers.
Is focusing on a client – who in the case of BTS usually has specific demands – a challenging task?
Working with these clients definitely requires more attention and commitment on our part. However, this is Panattoni’s competitive advantage. If we put more effort into the work we do for a particular client, the results are better as well. Our operations are based on this strategy: more work, more commitment, more benefits for the client.
When continuously looking for new solutions, you must have a very clear plan for the next few years. In your opinion, what sectors will be responsible for the most growth?
I believe it will be mostly e-commerce. This is an industry that has already been generating high demand. Let us remember that companies located in Poland also support clients in the West, mainly in Germany. What counts the most in e-commerce is the speed of delivery, and that is what makes the development of new warehouse locations in Poland inevitable. Other sectors with potential for growth include manufacturing and the automotive industry.
One of Panattoni Europe’s strategies are the so-called “build and sell” developments. Are you going to continue focusing on this type of activity?
Yes. We are not a long-term owner, but a long-term facility administrator. Our company is more of a developer than an investment fund. This gives us a lot of flexibility, and we want to be on the side of our clients and property, and not on the side of money.
Do you think that funds are willing to buy warehouse parks? How does the Polish investment market look in this respect?
The industrial property market is an extremely attractive product for investment funds, especially that the cost of money is very low these days. Industrial real estate has a fairly high capitalisation rate, that is the rate of return on investment. This is why we should expect a significant inflow of funds in this sector. Moreover, the real estate market itself considers warehouses to be an increasingly valuable product. And this is mainly due to the growth of e-commerce, which I have already mentioned. It is clear that the trend is upward, so many investors that have been previously investing in retail see that the space occupied by traditional stores has been decreasing, with the stores shifting their operations and transforming into showrooms, while a significant amount of goods from warehouses goes directly to customers. So there are a few positive aspects that ensure that this type of real estate is in constant demand among investors.
Can Brexit help with this?
Some investors who have been following the situation in Great Britain and are interested in its market might fear its consequences and start looking for new markets. In this case, Poland can benefit from it.
How do you see the future of the warehouse market?
According to JLL data, Poland has more than 10 million square metres of modern warehouse space. For comparison, Germany has 80 million sqm. Naturally, Germany’s market is twice as big, but on the other hand, there is a lot of older, unregistered space there. Because of this, the German market has much more potential when it comes to demand. If we look at the Polish market from this perspective, we can see that there is still a lot of growth ahead of us. Logistically, our country is a perfect location, as it is situated between the East and the West. This allows Poland to support the neighbouring markets. And then there is the human capital – the potential of the entire Eastern Poland has been completely untapped. In that respect, the entire region of Central Europe is very attractive for warehouse developers.
And what are Panattoni’s plans for the coming years?
Currently we are strongly committed to the German market, which is excellent for us, as it is very fluid. Recently we have won the tender for the development of new logistics complex with an area of 11,130 sqm for Dachser. It will be constructed in Überherrn in Saarland, on a 24,000 sqm plot. It will consist of a warehouse with an area of 10,530 sqm and an office with an area of 600 sqm. The completion of this project is scheduled for the end of October this year. In the longer term, we can also see an opportunity for expanding our operations in Romania. Our decision to enter the Romanian market was dictated by this country’s significant potential. According to the European Commission, its constantly improving economic performance should continue to improve in the coming years. Forecasts indicate that in 2016, Romania will achieve economic growth of 4.1 percent, with 3.6 percent in 2017, and thus will overtake countries such as Poland, Ireland and Slovakia in this respect. Moreover, Romania’s political situation, fluidity and transparency have improved. Of course, we want to remain very active on the Polish market. We have been seeing very high demand from tenants, historically low costs of development, as well as a relatively low cost of land. Thanks to all this, our actions make a lot of sense. Poland and the Czech Republic have become the main link in the supply chain connecting Germany to global markets. Investors can see this and are willing to invest in the Polish industrial sector. We still want to achieve more, so we are planning further expansion. Our plans are built around our current strategy of rapid response to what is happening in the market and focusing on the clients and their needs. This is made possible thanks to the expansion of our own parks and launching new parks in previously overlooked regions, including Eastern Poland. And we still intend to develop tailor-made facilities.
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