E-commerce trends in the Polish logistics sector are proving Covid-19 wrong

Sentiment towards global real estate has fallen sharply but the outlook for the Polish logistics sector is proving Covid-19 wrong. Exceptional demand from tenants for space close to urban clusters, growing preference for e-groceries and rethink of supply chains are combining to drive the sector forward according to Poland-focused European Logistics Investment (ELI).

Since 2018, Netherlands based ELI, in which Redefine
Properties has a 46.5% equity interest, has developed eight assets with another
five under construction and six under due diligence for future development. The
company consists of a Polish-focused logistics platform of approximately 527 000m2
of standing assets, 145 000m2 of assets under development and over 1
million sqm of potential development pipeline.

We continue to prioritise efforts and leverage opportunities to expand through the development of well-located assets occupied by high quality tenants. Our strategy is centred on creating a well-diversified and leading Polish logistics platform capitalising on the strong economic and real estate fundamentals in the sector” comments Andrew Konig, CEO of Redefine Properties.

The sector’s buoyancy can be attributed to construction lead
times which tend to be relatively short, as well as low capital expenditure. In
times of volatility, assets that require smaller capital outlay can be
appealing because of their capacity to preserve investor returns.

We see a huge potential in creating a large and diversified
portfolio with a good mix between built-to-suit, inner-city, multi-tenanted and
single-tenanted developments in prime nodes. Over the next five to seven years,
we will be looking to increase our Polish industrial assets to up to 2 million
sqm in size and to target
€1 billion in gross asset value” says
Konig.

Poland is a prime location for the logistics sector due to the country’s position in central Europe. Moreover, it is a liquid real estate market with high investor appeal and producing hard currency free cashflow.” 

Occupier demand in Poland continues to be driven by
e-commerce with small warehousing units within the inner-city areas and last
mile facilities close to urban centres which are in demand and leads to higher
rentals and asset values. Poland is fast becoming a significant logistics hub
for international players and it is competitive compared with Western Europe in
terms of rental rates and labour costs.  

The industrial sector had its best six months, until June 2020. Twenty deals with a total volume of almost EUR1.2 billion were recorded, mainly driven by large portfolio transactions. Prime warehouse yields stand at 6.25% with quality assets, with long leased assets trading at sub 5.00%, and Warsaw inner city projects at around 5.50%,” says Pieter Prinsloo, Redefine Europe CEO.  

As the popularity of online shopping grows, the demand from occupiers will also increase. During the pandemic, consumers rediscovered the convenience of online shopping, even adding groceries to their checkout baskets. As retailers and logistics firms race to deliver a seamless experience and faster services, demand is likely to rise sharply for light industrial properties near city centres,” 

The sector benefitted from a spike in e-commerce and courier
service activity during the Covid-19 period resulting in some tenants taking
short-term leases to secure additional space. This was because of many
companies holding greater amounts of inventory to buffer their supply-chain
responsiveness. 

Poland is also seeing a wave of new
businesses wanting to move manufacturing away from Asia and closer to customers
in Europe. The supply chain disruptions from Covid-19 is proving to be the
biggest motivator. 

Source: Propertywheel.co.za | https://propertywheel.co.za/2020/10/e-commerce-trends-in-the-polish-logistics-sector-are-proving-covid-19-wrong/

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