Poland Today recently caught up with Andrzej Wroński, Group Head of Asset Management P3 Logistic Parks, who compares the head-spinning development of the warehouse & logistics sector now with the pre-crash days of 2006/2007.
PT: I’ve heard about potential overheating in the Polish real estate market in the near future. What do you think?
AW: It’s interesting that people are starting to ask that question – they weren’t asking that question in 2007, before the financial crash. 2017 will be another record year –everyone is expanding, but in my view it’s much more healthy than in 2007. In 2006 – 2008 it was all happening much too fast. In 2004 the whole market was about 2 million sqm, not we are getting closer to 13 million sqm in Poland. Another at least 1 million sqm is in the pipeline. The underlying economic situation is much better now than it was before. Investors see Poland as a Western European country in terms of yield. The market is mature, and it’s the biggest in the region. And we have a trend where new buildings are replacing those built 15 years ago. Another important factor underpinning the stable growth is that all markets in Poland are strong, often in areas which had no market before, such as Tri-City, Szczecin, Bydgoszcz and Kraków, which are all growing. This consists of both new companies coming in, and existing companies expanding.
PT: What about the warehouses themselves – is there a great improvement in their quality, not that Poland sees itself as a developed market?
AW: Everything is better. The insulation has improved, there are LED systems, smart electronic systems, heating from solar panels. Of course every case is different. Not everyone will pay premium – you need to adjust to the client. But certainly you see more and more automation, which tend to be simple innovations. This is necessary because the workforce is getting harder to find, and more expensive. Having said that, if companies are prepared to pay fair wages and know how to go about hiring people, it’s not so difficult. If employees feel that the employment is sustainable, you can find them – and they are high quality.
PT: One thing you always hear about the Polish warehouse market is the low rents, lower than in other countries. Why is this?
AW: Low construction costs have traditionally driven this. There is also very strong competition, not only on the development side, but also on the investment side. If land was scarce, then prices would go up. If rents went up by 15% or so, would it stop tenants taking space? Not really. We find our way we compete on the market. We concentrate on the parks, on the locations where we want to be, then we are competitive with anyone. We are a patient developer, investor and owner.
PT: Is there a new company culture with the new owners? (P3 was bought by GIC, formerly known as The Government of Singapore Investment Corporation, in 2016)
AW: We’re still P3, still run by Ian (Worboys), so it’s only been a limited change. I expect that we will continue what we’re doing now. The last few years have been great for P3. We’re developing fast – we now have 4.1 million sqm in Europe, and it’s great to be a part of this company. It’s moving very fast, so you just have to decide what is possible and what is not possible. It’s a balance. It’s a much faster market that the office and retail market. Is it more competitive? Not really – if you look at the office sector, you see a lot of pipeline.