A logistics park can be defined as an independent business entity, possessing a designated area connected to the transport environment, infrastructure (roads, yards, parking lots, engineering structures, and buildings), equipment for moving and storing goods, as well as for managing cargo flow, personnel, and organization. Such a park also provides logistics services (transport, transshipment, warehousing, distribution, and picking), thereby fulfilling supply and distribution functions.
One million square meters
Modern facilities are mainly objects built for the investors’ own needs and warehouse-industrial centers. New facilities are characterized by non-flammable, level, and durable flooring, a permissible storage height of 8-12 m, large maneuvering yards, hydraulic docks, modern fire protection, heating, security, telecommunications solutions, etc. The first modern warehouse centers, namely the Warsaw Distribution Center and Warsaw Industrial Center, began construction in Warsaw in 1995 on Szyszkowa Street. The Ożarów Business Center was built along the Poznań route. Platan Park was erected in the vicinity of Puławska Street. In Piaseczno, there is the Diamond Business Park and the Olmar Warehouse Center. Europa Park was built along the Katowice route, and the Stolica Business Center along the Kraków route. In Praga, the Żerań Park and Sanpro Center parks were built. The main tenants are Western corporations and logistics companies. Recently, however, the share of small companies, which until now mainly rented old warehouses, has also been increasing.
Taking into account the square footage of modern warehouse space, Warsaw holds a leading position compared to other regions of Poland. It is enough to compare 974,000 sqm in Warsaw and almost 200,000 sqm in other regions of Poland.
There are three basic types of facilities offering warehouse space: office-warehouse projects located mostly within city limits (Zone I, the so-called urban zone), whose total area is 270,000 sqm; warehouse facilities located within a 15 km radius of city limits (Zone II or suburban), which occupy about 405,000 sqm (including facilities built for the investors’ own needs); and logistics parks located within a radius of more than 30 km from the borders of Warsaw (Zone III, called the logistics zone), whose total area is estimated at nearly 299,000 sqm, according to a published report by Jones Lang LaSalle. Built-to-suit projects (built for the needs of a specific client) dominated speculative projects. As a result, built-to-suit projects accounted for 86 percent of new supply at the end of 2003.
The main driver of demand in the warehouse space market is logistics companies as well as manufacturers and importers of consumer goods. They are mainly interested in the offer of the so-called Zone III, where the largest warehouse parks are being built, most of which are located about 50 km from the capital’s center (Europa Park in Mszczonów, Prologis Park in Teresin). They are designed mainly with logistics operators and large corporations with transnational reach in mind, interested in areas of no less than about 10,000 sqm.
National and pan-European distribution centers operate within them, serving clients from, among others, the household appliances, interior design, and automotive industries. Transactional rent rates in this zone oscillate around 3.2 – 3.5 USD/sqm/month. Offices located at such warehouse parks are also cheap, because the cost of renting a sqm of high-standard space currently does not exceed 7-8 euros per month.
Service charges are in the range of 0.7-1 euro (depending on the zone and standard of the facility). They cover the costs of 24-hour security for the warehouse park, cleaning of the common parts of the facility, water supply, and external lighting.
Specifics of the warehouse market
Logistics parks have features that distinguish them from other real estate. They are characterized by the fact that the creation of such an investment is associated with the necessity of acquiring a land property with a very large area located in a good location, and such a location is closely related to the position and quality of roads, highways, and transit routes, railway lines, and airports. Bearing in mind that warehousing is only a part of the entire logistics process, the use of a warehouse depends on the goods distribution system, because a warehouse is a very broad concept. It is most often identified with the concept of a hall. It must be remembered that in all logistics parks, light production and packaging are also carried out, and often warehouses are adapted for typical production tasks. The use of a warehouse can be very diverse – from simple storage of goods, through refrigeration, storage of chemical and dangerous articles, precision equipment, perishable goods, medicines, spare parts, or bulk goods. Each of the presented variants requires completely different adaptation of the hall and meeting various technical requirements and standards. On the other hand, warehousing and production are closely related to compliance with environmental protection standards and the significant disturbances to the surroundings that arise during operation.
Logistics, roads, and transport
More and more companies are providing warehousing, repacking, picking, packaging, and transport services. The best logistics companies are able to reduce logistics costs by up to 30 percent. However, the obstacle to further reduction is primarily the poor and constantly deteriorating technical condition of the surface on national roads. It is estimated that only 0.5% of roads meet EU standards. Poland’s accession to the EU may cause a further deterioration of the state of Polish roads, as the main Polish international routes will be opened to the largest EU trucks (up to 44 tons). Other roads will be gradually made available until 2011. The associated cost of modernizing Polish roads of greater importance (22,000 km) is estimated at 20 billion euros.
Increase in requirements and space
Adopting ecological standards – in connection with Poland’s accession to the EU – requires, among other things, limiting production in the most burdensome plants, equipping existing plants with environmental protection devices, and all this will also affect the demand for a properly prepared and secured warehouse base.
Preparing for the new conditions, investors in 2002 and 2003 launched an assault on the real estate market. Despite the economic stagnation in 2002, they led to a real boom, which resulted in reaching a state of saturation in the current situation. For example, in 2001, 100,000 sqm of warehouse space was built, which is 5 times more than in the previous year.
Warehouses and logistics parks were built primarily to order for large retail chains that will use this space when supplying their hypermarkets. Modern logistics parks – which do not belong to hypermarkets – are also not empty; this is the case not only in the Warsaw region but also in the regions of Łódź, Poznań, Piotrków Trybunalski, and in Silesia. Everywhere there, there is practically no free space.
Building “in reserve” is not done
Large logistics parks in other regions of Poland are being built because retail chains are developing, and supplying hypermarkets from distant warehouses causes an increase in costs, which traders do not want to allow. Given the balanced supply, new investments are practically not started because no investor wants to risk the facility standing unused. Besides, the creation of new warehouse facilities would once again cause a decrease in rental prices, which property owners would not want to allow. There is one more reason for not starting new investments – warehouse halls are built very quickly and, in addition, they can easily be equipped with the devices that the client will need. If you can quickly build “to order” – this is how 78 percent of implemented projects are created – then building “in reserve” misses the point.
Space is used rationally
Logistics centers located no more than 100 km from Warsaw have an area of about 300,000 sqm, and their owners cannot complain about a lack of tenants either. The free space in logistics parks totals just over 10,000 sqm. The fact that demand has balanced supply was also decided by rental prices. After a significant reduction, they stabilized at a level lower than 4 USD per 1 sqm. In other regions of Poland, modern logistics parks occupy no more than 200,000 sqm, and their utilization is similar to that in the Warsaw region (about 5 percent of free space). Rental prices also do not differ from those that have to be paid in the vicinity of the capital.
The warehouse heart of Poland
Currently, the commercialization of two large logistics projects has begun, which will be implemented in central Poland, within a 150-kilometer radius of Warsaw. Logistic City-Piotrków Distribution Center will in the future have 370,000 square meters of total area and will be built along the E 67 route near Piotrków Trybunalski. Piotrków Trybunalski and its surroundings – next to Warsaw – are the second warehouse heart of Poland, which should not be surprising. The city lies in the vicinity of the geographical center of the country. Piotrków also has an excellent location in relation to the communication grid – at the intersection of the most important communication routes in Poland. It is here that the E 67 route, connecting Warsaw and Wrocław, meets the A-1 motorway, which in the future will connect the Tri-City with Upper Silesia. The Central Railway Line runs nearby.
The advantages of Piotrków’s location were noticed, as one of the first, by the Swedish furniture concern IKEA, which built its main warehouse here. The hall used by IKEA has over 100,000 sqm and is the largest facility of this type in Poland.
In Piotrków, the company FM Logistics has its second logistics park after Mszczonów, and in the neighborhood, there is also a Regional Logistics Center built by ProLogis, whose largest tenant is the food and chemical giant Unilever. In the vicinity of Piotrków, there are also projects under implementation – the largest of them, which will be built in the immediate vicinity of the Logistic City-Piotrków Distribution Center, is Poland Central. The planned logistics center, whose investors are private individuals from Poland and Great Britain, will be built on 122 ha and will have about 500,000 sqm of total area.
The construction of the Logistic City-Piotrków Distribution Center will take place in 6 phases. The first hall with an area of 20,000 sqm, built speculatively, is to be ready at the turn of the first and second quarter of 2005. Subsequent ones will be built to order (build-to-suit). The investor of LC-PDC is Adam Banaszczyk, a private entrepreneur from Piotrków. The author of the architectural concept of the complex is the international office Denton Corker Marshall.
At the intersection of motorways – Tulipan
50 kilometers north-west of Piotrków, in Stryków, where the A-1 and A-2 motorways will intersect in the future, Tulipan Park-Stryków will be built. The complex will be situated 50 meters from the A-2 and just 3 kilometers from the future communication junction. It is only 15 kilometers from here to the center of Łódź.
Tulipan Park, which will ultimately have 275,000 sqm for rent, will be built on a 60 ha plot. At the moment, infrastructure works and intensive talks with potential tenants are underway here. The investor does not disclose which companies are being negotiated with.
The developer of the complex is the Dutch Grontmij Real Estate, a company recently present on the Polish market. In addition to the logistics project in Stryków, the company is planning similar ventures in Gliwice and Poznań. Grontmij Real Estate also owns plots in Warsaw, Kraków, Wrocław, and Gdańsk.
Warehouse-logistics space in Poland
Next to the Warsaw agglomeration, the largest concentration of existing warehouse-logistics space is in the vicinity of Poznań, Katowice, Łódź, Kraków, and Wrocław, and newly created or ongoing significant investments are located mainly in south-western Poland.
A report by the consulting firm CB Richard Ellis shows that in the first half of 2004, the total modern warehouse and logistics space in Poland increased by 80,000 sqm and amounted to 1.2 million sqm. The increase in space planned by the end of 2004 is about 81,000 sqm. In the same period, an increase in demand for warehouse-logistics space was also noticeable – 89,000 sqm was rented. This represents an increase of 52.6 percent compared to the second half of 2003. Initial rental rates have not changed compared to 2003.
CB Richard Ellis predicts that in the future, logistics parks will develop the fastest. At the end of the first half of 2004, there was a total of 538,300 sqm of warehouse space in the warehouse-office park sector. Space of the highest standard, class A, accounted for 68 percent and amounted to 365,781 sqm.
In the first two quarters of 2004, a total of 31,650 sqm of space was rented, which is an increase of 47 percent compared to the second half of 2003. At the end of the second quarter, the total size of rented space amounted to over 505,000 sqm. At the end of the first half of 2004, the unrented space indicator was 6.53 percent. Compared to the end of 2003, a decrease of over 40 percent was recorded, which was caused by the lack of supply of new warehouse space and an increase in the size of rented space during the first half of 2004. Analysts, however, predict an increase in the vacancy rate because 25,000 sqm of space is currently under construction.
In the case of logistics parks, at the end of the second quarter of 2004, the amount of space in this sector was 456,400 sqm. Resources increased by 57,400 sqm, i.e., by 15 percent compared to the end of 2003. During this period, new facilities were built: in Mszczonów, Błonie, and Teresin. The unrented space indicator was 15.6 percent and was higher than at the end of 2003.
The number of modern speculative buildings attractive to logistics, distribution, and production companies is limited, which causes stabilization of rent rates. Trends of buying and securing plots are observed near important road connections. Developers prefer built-to-suit projects due to lower investment risk.
The most popular regions among investors are the outskirts of cities such as Łódź (Stryków), Katowice, Wrocław, Poznań, and plots located along the A-4 route. In 2003, the largest transaction in Central Europe was signed by Unilever, which rented 41,077 sqm of warehouse space and 1,000 sqm of office space in ProLogis Park Piotrków.
Or maybe by the sea
A potentially interesting region for warehouse investments is the Tri-City, where the new seaport will have a major impact on the market. Manufacturers from Western Europe are considering changing locations and moving their factories to Poland due to operating costs in Central Europe, which are cheaper than in the West. Poland is an attractive place for investments due to the significant unemployment rate and highly qualified staff. According to EUROSTAT, the cost of one hour of work for one person in the service sector in the European Union is about 22 euros compared to 4.5 euros in Poland.
Are the Czechs no longer a threat?
Poland, compared to other significant markets in Eastern and Central Europe, is a competitive country for companies that intend to move their production and logistics centers to the East. Our advantage is the relatively high level of unemployment and highly qualified human resources, and importantly, cheaper than in other Eastern European countries. The biggest competitor for Poland in the region is the Czech Republic. However, the number of new investments in the Czech Republic will likely fall due to the numerous foreign investments already there, the low unemployment rate, and the lack of highly qualified staff. In Poland, demand for new warehouse space will be generated mainly by manufacturers (e.g., the automotive sector) and trading companies. However, our country still needs infrastructure development and a stable economic situation to reduce developer uncertainty.