33 (128) 2018
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E-commerce and last-mile delivery “driving logistics real estate”

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Magdalena Szulc, business unit director Central Europe, SEGRO

Michael Dembinski: Let's start with a bit of history – SEGRO will soon be celebrating its centenary. I remember the Slough Trading Estate, near Heathrow Airport, from my earliest childhood (my father worked nearby) – this is the  where your company has its roots (the name SEGRO being derived from Slough Estates GROup). How long has SEGRO been in Poland?

Magdalena Szulc: It’s been 12 years since SEGRO entered the Polish market. During this time we have reached a stable position among the leaders in the area of warehouse development and management. Today we own and manage 16 parks in eight core locations across Poland. The market itself has changed a lot over these years; we observe its dynamic growth mainly due to expansion of e-commerce sector. This, in turn, results in increasing demand for big warehouse space dedicated to distribution centres.

You have a specific business model on the market, setting you apart from your competitors. What advantages does it offer to your clients?

SEGRO as a developer, investor and manager, strongly emphasises its supportive role for the customers. Each SEGRO park has a dedicated property manager responsible for cooperation with companies located there, throughout the whole agreement period. The main objective is to instantly react to all customers’ needs. Many companies which just started their operations in logistics parks don't have all the knowledge they need, like the fire safety regulations and procedures. By sharing our know-how we prevent them from making mistakes which may even result in suspending  production, which is very costly. The property manager’s efforts also guarantee cost efficiency in purchasing utilities, as the agreements with suppliers are negotiated with economies of scale, providing the best rates, that individual negotiations cannot obtain. One of SEGRO property managers, responsible for parks in Warsaw and Gdańsk, was recently awarded a Eurobuild Award as the  Warehouse Manager of the Year meaning that our efforts are recognised by the market. Also our SEGRO Logistics Park Warsaw in Nadarzyn was awarded by customers themselves as Best Warehouse of the Year 2017.

Poland's logistics infrastructure has developed significantly as a result of EU-funded investment. To what extent has this changed the logistics map of Poland? Are you detecting new hot-spots that your clients and potential clients are interested in? – Which parts of Poland are you currently in, and where are you planning on expanding?

That’s true, the infrastructure in Poland has improved, however, there is still a lot to be done. According to our strategy we develop our parks near the biggest cities and close to the most important communication hubs. We believe that this is the best for our customers and for their businesses to grow. Those key agglomerations are not only potential local markets but also a great source of manpower, lack of which recently becomes an issue. Therefore SEGRO is present only in core locations: Warsaw, Poznań, Stryków [near the intersection between the A1 and A2 motorways], Łódź, Gdańsk, Gliwice [near the intersection between the A2 and A4 motorways], Tychy and Wrocław. We believe in those regions, they arouse big interest among customers; at the moment we don't have plans to expand elsewhere.

SEGRO is a FTSE 100 company with multi-billion pound investments across the EU. How is Poland viewed from SEGRO's UK headquarters?

For 12 years, SEGRO Poland is keeping at the market’s forefront. We are consequently developing our portfolio in the core locations. As a very promising market with strong growth prospects, we play an important role for the SEGRO Group. Poland’s growth forecasts are really optimistic that’s why in 2018 we plan to maintain our market share, expand our land bank in the existing locations and to maintain low vacancy rates. And as always, to take good care of our customers.

Do you think Brexit will change the way Poland is perceived from an investment point of view? Are you seeing firms looking to move their centres of European activity from the UK towards the continent?

Poland is and will be an opportunity from the investment’s perspective as the country's economy keeps developing, the infrastructure improves, and manpower cost remain lower than in other EU markets. In terms of Brexit and whether there's an impact on the companies movement; it can affect manufacturing companies though regarding SEGRO's portfolio in UK, the answer is “not really”. The vast majority of customers in our portfolio are dealing with inbound consumption, serving local populations, whether it concerns big-box or urban warehouses. It is then all about consumption, about urban population growth in particular as well as about last-mile delivery from internet purchase centres. As far as our portfolio is concerned, we think that these forces, the structural drivers, are much more important than any Brexit concerns.

Last year saw the Polish economy grow by 4.6%, while the construction sector experienced growth of 34.7% in the year to January 2018. BPCC members are reporting difficulties in recruitment and retention of employees, saying that they expect labour shortages to be the main limiting factor to growth this year. Is your supply chain of general contractors and subcontractors coping somehow, or are skills shortages beginning to affect margins and deadlines?

The unemployment rate in Poland has been dropping systematically, in some cities falling below 3%. We can definitely say that we have an employee's market. The labour shortage is especially noticeable among blue collar workers who are the biggest group in the warehouse and light-production sector. More frequently we hear also from our contractors that the recruitment and retention of employees becomes an issue but we don’t observe this fact affecting our margins or deadlines yet. Low unemployment may, though, result in a rise of construction costs, as construction companies may struggle with higher-than-usual salary expectations.

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