According to data from Cushman & Wakefield, a third of Poland’s approximately 33 million sqm of industrial stock was built in the last three years, with half of it less than five years old. Despite being young, the Polish industrial market is very mature, necessitating industrial asset owners to embrace appropriate optimisation strategies and cyclical risk assessments. Key to this process is the adoption of a multifaceted approach and prioritization of ESG goals, reveals Cushman & Wakefield’s latest report.
"The growing volume of warehouse space has positioned Poland among the three largest markets in the European Union, each with more than 30 million sqm of industrial stock. Poland has overtaken the Netherlands, securing third place behind Germany and France. The potential for further growth is immense. Given Poland’s geographical position, ample plot availability and 20 million sqm of development opportunities on land secured by investors, the Polish industrial market is projected to expand to 55-60 million sqm. A third of Poland’s nearly 33 million sqm of industrial stock was built in the last three years, with half of it less than five years old. This highlights its very young status. However, occupier requirements are growing, technological advancements continue to accelerate and the market is facing mounting pressure to align with ESG standards due to climate change. In this context, smart industrial asset management is crucial to keeping pace with ongoing changes", comments Damian Kołata, Partner, Head of Industrial & Logistics Agency Poland, Head of E-Commerce CEE, Cushman & Wakefield.
Additionally, the industrial market, not only in Poland, is becoming increasingly diverse. The unwavering popularity of e-commerce continues to drive demand for micro-hubs and last-mile sites to guarantee end consumers short delivery times. Demand for additional space is also fuelled by the nearshoring of manufacturing. The nature of nearshoring will vary between sectors and companies within those sectors. In turn, this will have differing impacts on the choice of location and exact space requirements. For example, relocating to locations with higher labour costs could drive the need for full automation.
"Ultimately, such changes are likely to require either partial or full supply chain optimisation programmes. This provides opportunities for industrial asset owners who are prepared to collaborate with tenants to explore the potential delivery of new BTS facilities or customisation of existing buildings. Helping tenants make savings in transportation costs not only reduces greenhouse gas emissions but could also offset the higher rents required to develop new sites. Further downstream benefits could also be realised through more efficient warehouse design and operation. Together, these factors provide direct benefits to asset owners in the form of reduced Scope 2 and Scope 3 emissions, as well as potentially higher returns and stronger tenant relationships", adds Damian Kołata.
It is against this backdrop of structural change that cyclical challenges have become more acute
Financial discipline has always been important to businesses, especially in low-margin sectors, but during the previous financial cycle, undertaking capital works was financially easier. As capitalisation rates continued to compress, capital expenditure programmes could be more readily written off against the increasing value of the asset.
"Owners of warehouse and industrial assets are now facing the challenge of rising operating costs, which is likely to hinder capital and upgrade works undertaken to increase asset value in the long term. Rental growth is helping to partially offset this decline in asset value. However, in this context, it may be tempting to do nothing, or at least put off capital expenditure programmes until they are considered essential. This, however, poses a risk to the operational and financial value of the asset", explains Grzegorz Dyląg, Partner, Head of Asset Services Business Space, Asset Services EMEA, Cushman & Wakefield.
Not all projects require significant capital investment. Even smaller-scale, well-planned initiatives can significantly improve asset efficiency. These may include smart metering, lighting upgrades and the revitalisation of green spaces to enhance biodiversity around a property and improve its overall operation.
How could asset managers identify areas for improvement?
This has to start with adopting a strategy focused on analysis and reporting. Only in this way can accurate assessments of the cost and revenue flows be derived to drive operational efficiency. For warehouse and industrial projects, achieving this efficiency also involves pursuing ambitious ESG goals - a particularly complex challenge in this real estate segment.
"For warehouse occupiers, real estate may constitute only a small proportion of their carbon emissions given wider supply chain considerations such as transport of raw and finished products. As a result, the selection of manufacturing and warehousing sites is a critical step towards optimisation in this sector. For example, last-mile delivery projects must be located within major agglomerations, not only to reduce transport costs but also to cut transport emissions, thereby making a meaningful contribution to sustainability initiatives. This is why many asset managers support tenants in relocation to alternative warehouse properties", adds Grzegorz Dyląg.
Another strategic area is ensuring a secure supply of sustainably generated energy. Leveraging rooftops for the installation of PVs or fostering cooperation across entire logistics parks can deliver significant benefits.
"Investment in technology and sustainability initiatives will be key to maximising industrial asset value. Beyond environmental considerations, there is a growing need to generate social value. Arguably, this is more challenging in the logistics and industrial sector given the location of assets and the nature of operations. Notwithstanding this, there is a growing number of other initiatives, with warehouse landlords supporting public transport options, greater adoption of green spaces, the introduction of wellbeing initiatives or organising community engagement events", concludes Grzegorz Dyląg.
