European businesses have for years been shifting manufacturing to remote locations, targeting Asia Pacific in particular. Recent global turmoil has, however, disrupted supply chains, revealing the length and complexity of processes enabling the sourcing, transport and consumption of various products. Furthermore, the growing significance of sustainability is compelling companies to rethink their business strategies. This is naturally shifting the focus of business to nearshoring and… to Poland. Cushman & Wakefield estimates that warehouse occupancy and operating costs in Poland are even over 50% lower than in some Western European countries.
Retreating from Asia
Countries in the Far East, especially China, India, Malaysia, Taiwan and Vietnam, have for years been the world’s top business investment destinations. Their key advantage was lower unit production costs resulting from significantly lower wages than in Europe or North America. This, coupled with a large pool of labour and an attractive investment environment (including subsidies, tax incentives and less stringent regulations), would drive companies to relocate manufacturing to those countries.
Due to the pandemic, well-functioning supply chains became a key focus of attention for absolutely everyone – not only producers and retailers but also consumers who were hard hit by global turmoil. As a result, companies are analysing and implementing strategies in response to changing risks. The answer to this is, among other things, nearshoring.
“Before the pandemic, nearshoring, reshoring and friendshoring were just theoretical concepts in global supply chain management. Now, in the aftermath of the pandemic and hostilities in neighbouring Ukraine, the relocation of assembly and manufacturing plants closer to the final production place or consumer markets is no longer just a buzzword but a real phenomenon which is expected to gain traction on the Polish warehouse market,” says Damian Kołata, Head of Industrial & Logistics Agency Poland, Head of E-Commerce CEE, Cushman & Wakefield.
Companies are being driven to opt for nearshoring not only by risk mitigation but also (as in the case of offshoring before) their desire to cut costs, including rising sea transportation costs. Furthermore, corporate strategies are increasingly taking account of ESG goals and the need to reduce carbon footprint. Organisations which will not implement sustainable practices risk losing corporate clients and negative consumer sentiment in the future.
An opportunity for Central and Eastern Europe
According to Cushman & Wakefield’s report, CEE is beyond doubt one of the regions attracting growing levels of interest from investors considering relocation of manufacturing. Countries such as Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Bulgaria, Romania, Serbia, Croatia, the Baltic states and the Western Balkans are geographically closer and offer greater business flexibility and resilience.
“For European manufacturers, operating in Central and Eastern Europe means shorter delivery times, lower transport costs and faster order fulfilment. This benefits many sectors, including automotive, industrial and electronics. Investors eyeing this part of Europe also include consumer goods and fast fashion companies,” adds Adrian Semaan, Senior Research Consultant, Industrial & Logistics Agency, Cushman & Wakefield.
The investment attractiveness of this part of Europe will be further enhanced by the completion of Via Carpatia, a road transport corridor running from Klaipeda in Lithuania through Eastern Poland, Slovakia, Hungary, Romania and Bulgaria to Thessaloniki in Greece.
Poland in the spotlight
Is Poland likely to be the key regional beneficiary of nearshoring? The answer is apparently yes. As well as having an increasingly modern road infrastructure, Poland is the largest warehouse market in this part of Europe.
“Cushman & Wakefield estimates that over 50% of Poland’s warehouse stock amounting to over 30 million sq m dedicated to logistics and production was built in the last five years. What’s more, within the European Union, Poland is only behind Germany, France and the Netherlands in terms of warehouse stock. It also led the way in the EU for new warehouse supply last year. Poland has also seen impressive growth in demand – in 2022 it came second behind Germany for warehouse take-up. This solidifies our position as a major international logistics and manufacturing hub,” adds Damian Kołata.
Costs - more than anything else - will also be a strong argument in favour of relocating business to Poland.
“A survey carried out by Cushman & Wakefield has clearly revealed that warehouse occupancy and operating costs in Poland are 34% lower in the Czech Republic, 45% lower than in Spain and as much as 62% lower than in Germany. These figures speak volumes and are likely to be a strong incentive for other international investors,” concludes Damian Kołata.
