ELSEWHERE: Warehouses

Where Warehouses Grow

Existing warehouse properties can be divided into two groups. The first group includes equipped storage facilities located within large office buildings. As a rule, such office centers are located within the city boundaries, many of them occupying territory on industrial estates.

Another group includes logistics distribution centers, the construction of which is subject to the most stringent requirements.

In the opinion of Maria Bninska, a PR manager with Ernst & Young Poland, major warehouse complexes must be located within the so-called ‘zones of secondary economic importance’. High transport accessibility is another compulsory requirement applicable to major warehousing complexes. That is why more and more often such facilities are being built along regional motorways.

Uncultured Legacy

The development of the warehouse facilities sector in the countries of Central and Eastern Europe is governed by several major trends. The sector began developing rapidly in the early 1990s, when major international retail chains arrived in the region.

In certain cases, by purchasing or leasing buildings for their needs, they had to erect modern storage facilities themselves or to re-equip existing warehouses. There was, however, an alternative – using detached buildings.

Yet, such premises could only be considered a temporary solution since they failed to meet the requirements governing warehouse properties in Europe.

Tenants complained mostly about low ceilings of just 6 to 8 meters, a lack of spur tracks and the lack of professional cleaning services. All that prompted major retail chains and regional and international development companies to combine their efforts. By the late 90s the sector of warehouse properties in the CEE countries was developing at an accelerated pace.

Poland by tradition leads the way among the CEE countries in terms of warehouse facilities. Nonetheless, even the Polish market has a long way to go. As of today, a considerable share of storage facilities is located near Warsaw, the capital of the country, although modern warehouses are also being erected in other major cities.

Warsaw is engirdled with three belts of warehouse facilities. The first, the inner belt, located in the city center, is the most prestigious. Premises of over 2,000sqm are rarely rented here. Goods are supplied to city stores directly from stock.

The second warehouse belt lies within a radius of 15-40 kilometers from the city center and includes the modern storage facilities Blonie, Ozarow and Piaseczno. Properties of 3,000 to 8,000sqm are offered for lease here.

The third belt lies in a radius of 50 kilometers from Warsaw, in the vicinity of the motorways linking Warsaw with the other major cities of Poznan, Lodz and Katowica where 10,000-sqm properties are usually rented. Major international and larger local companies operate on this kind of scale.

Poznan is the second Polish city where the warehouse sector is developing rapidly, owing to the increasingly strong ties with neighboring Germany.

Storage facilities are mushrooming along the Katowice-Dresden motorway, currently under construction, and due to be commissioned in 2009. Once that route opens shipments to Krakow and Wroclaw will increase.

As regards the general trends, warehouse properties of 700 to 2,000sqm located in office centers and mostly within city precincts, and properties of 10,000sqm and more located on the territory of logistics parks are in the highest demand.

Warehouse rental rates within the Warsaw city limits range from 4.5 to 5 euros per square meter a month. Outside the capital the average monthly rental rate for warehouse properties is lower – 3.25 to 4.7 euros.

The situation in the warehouse sector is the same in Hungary. Like in Poland, Hungary’s warehouse stock – a total of 2 million square meters – falls into two categories, i.e. reconditioned industrial facilities and new state-of-the-art buildings conforming to European standards.

Most warehouse complexes are concentrated on the outskirts of Budapest. Remarkably, 80 percent of Hungary’s warehouses occupy obsolete industrial premises, built mainly in 1950s and 1960s, failing to meet modern requirements.

Just like in many other CEE countries, construction of new warehouse properties in Hungary was initiated by major retail operators, such as Auchan and Tesco, which built warehouse complexes for their own use. The demand for warehouse facilities is still governed by major foreign companies from France, Germany, Italy and Austria.

Today warehouse facilities in Hungary develop mostly within the so-called golden triangle of Budapest – Djer – Sekeshfehervar. The latter has as many as three business parks where substantial properties are occupied by warehouse complexes.

In the opinion of Ilona Hardy, senior analyst of Cushman & Wakefield/Healey & Baker in Hungary, rental rates for warehouse premises are stable at the moment, with average rental charges ranging from 9.5 to 11 euros per square meter a month.

However, in the near future the development of the warehouse real estate sector will spread far beyond the boundaries of Budapest. Southwestern Hungary, where the three most important motorways intersect, is believed to be the most attractive area for developers of warehouse complexes, believes Ilona Hardy.

The Czech Republic is one of the strongest links in the sector of warehouse premises in Central and Eastern Europe. At the same time, in the opinion of certain commercial real estate market players, the situation in that country’s warehousing sector remains ‘vague’, despite ongoing development.

The Czech government’s efforts aimed at developing the major motorways linking the northern regions with the country’s south have clearly failed to satisfy the demands of major international retailers who are interested in the development of a more branching road network.

In Prague, warehouse complexes are located mostly in the southern and western parts of the city. The Czech capital has a total warehouse stock of 800,000sqm. Outside Prague warehouse complexes are being built mostly in the vicinity of the main trunk routes and in the direction from the west eastwards along the Rozvadov – Plzen – Prague – Brno – Ostrava motorway.

Most Czech regions specialize in certain industries, which determine the development of warehouse complexes across the country. For instance, an industrial park where considerable space is occupied mostly by warehouses was built in the vicinity of the airport in Brno, situated en route to Austria and Slovakia.

In a move to ‘streamline’ local light industry, another major city, Ostrava, launched the construction of warehouse complexes to meet their needs. Three warehouse construction projects are currently being implemented in Ceske Budejovice, the most democratic town in terms of warehousing development.

The past two years saw the growth of warehouse space within logistics parks. The parks D1 and Airport were commissioned during that period, while the Rudna park was expanded. According to Colliers International, the warehouse market in the Czech Republic has grown 20 percent.

Despite Slovakia falling behind the Czech Republic both in terms of warehouse construction and even more so in terms of direct investments in that sector, its prospects are seen as being among the best in the CEE countries, as Slovakia is expected to become a highly developed industrial state in the framework of the EU.

Modern class A warehousing premises are only beginning to emerge in Bratislava, the capital of Slovakia. Among the examples is Coca-Cola’s office in the eastern part of the city, combined with a warehousing complex.

Pacemakers

One of the largest investment deals in the Hungarian warehouse real estate sector was the recent acquisition by Austria’s Europolis Invest of the Airport Business Park and the M1 Business Park from US company AIG/Lincoln. DTZ experts value the transaction at 150 million euros.

Warehouse complexes in the Czech Republic, too, attract major international investors, specializing in real estate. Dutch firm Redevco bought two buildings of 10,000sqm each.

Investors from several countries, including Lehman Brothers International and Heitman International, as well as Hungary’s Crow Holdings Hungary and Hungarian Wallis Real Estate, combined their efforts to implement the construction of the 47-hectare Harbor Park, built outside Budapest.

Over the past few years the volume of lending for the construction of warehouse complexes grew in the region. The European Bank for Reconstruction and Development extended a $15 million loan to the Europa Distribution Center for construction of the Europa Park complex near Warsaw. The complex will include 15 buildings, offering over 300,000sqm of modern warehouse space.

Projects and Forecasts

If the warehousing construction continues to grow at the existing pace, it will take another two or three years to fully satisfy the demand for modern warehouse properties in the CEE countries

What all the most successful warehousing complexes built in the CEE countries have in common is that practically all of them have at least one or even several anchor tenants, who attract other tenants. For instance, one of the best warehouse complexes in Poland, Janki on the outskirts of Warsaw, leases premises to IKEA and Praktiker.

The best class A complexe in Warsaw and near it included the 90,000-sqm Alliance Logistic Center in Blonie, built by the US company Menard Doswell & Co.

Another major complex, ProLogis Park Blonie, erected by ProLogis, is also located in Blonie. Anchor tenants renting warehouses in the 36,000-sqm ProLogis Park Blonie include the major international companies Polifarb and L’Oreal. Another major warehouse complex is the 50,000-sqm Zeran Park in Warsaw. All those projects were implemented in the period 1990-2001.