Responsible development will be the future

Magdalena Szulc, managing director, Central Europe, for SEGRO, talks to the BPCC’s Michael Dembinski about the dynamically developing logistics-space sector in Poland, and the factors that are shaping it – green transformation, e-commerce and technology.





[This interview was conducted on 23 February 2022]

Poland is currently experiencing a boom in industrial real estate, with high demand and many investors engaged in speculative developments of warehouse space. What are the factors driving this boom, and to what extent is it sustainable in the longer term?

We have been observing a boom in the warehouse industry in Poland for some years now. It is partially related to the pandemic, which has significantly accelerated the development of e-commerce and evolution of customers’ demands for same-day delivery. Due to this evolving trend, logistics moves ever-closer to the end customer, which results in the development of a new warehouse format – urban warehousing and small business units. The growing power of e-commerce is also affecting retail, with shopping malls creating showrooms with warehouses at the back of stores.

Another factor influencing the increase in demand for Polish warehouses is the fact that the market in Poland with 21.7 million m2 of warehouse space for 38 million inhabitants is not as saturated as, for example, in Germany where it offers almost 80 million m2 of space for 83 million Germans. At the same time, rents are lower than in the case of our western European neighbours, hence many foreign companies are deciding to rent a warehouse or production space in Poland. The central location of our country and developed road network guarantees easy access to the market of whole Europe.

There are many indicators that the warehouse boom will continue at least in the next three to five years, the maximum future timeframe over which it’s possible to forecast in the changing world. One of these indicators is the fact that the purchasing power of Poles is constantly growing. It is true that we still have to catch up with the west of Europe on many levels, but over the years Polish society is becoming richer and can afford more.

The trend towards green building will only intensify as companies seek premises with the lowest-possible carbon footprint – far more energy-efficient than existing stock. How is SEGRO meeting the demand of tenants for environmentally friendly real estate? What other aspects of the ESG agenda are particularly important to SEGRO?

We have been investing in environment for years now and it’s evidenced by the fact that a third of the projects developed by us in Poland has a BREEAM certificate. It is twice more than the market average. It is the effect of certificating with BREEAM every one of our new developments since 2016. Today our ambition as a group is obtaining BREEAM certificate with Excellent score. On top of that, for over a year now, 100% of energy in SEGRO parks all over Poland comes from renewable energy sources like wind and sun. And we are also running a group-wide pan-European project related to photovoltaics, which is complex due to local legislation but is moving forward. For now, every new project’s roof is physically prepared to take photovoltaic panels in the nearest future; those where zoning plan allows it already have panels. We also don’t forget about green commuting: every park in Poland is equipped with chargers for hybrid and electric cars and in many we have built bicycle shelters. There are also beehives and insect hotels in five of our Polish parks. To make spaces around the warehouses greener and to take care of our customer’s employees’ well-being we care for additional plants and green areas to serve as relaxation zones.

All this leads to one of our goals of achieving carbon neutrality by 2030 as part of the Responsible SEGRO framework. But our activities are not limited only to activities in the field of "E", that is the environment. We are also supporting local communities, participating in such initiatives as Operation Clean River and cooperating with local authorities, and developing talents, for example with the SEGRO Academy. We also care about our customers with satisfaction surveys bringing us amazing results of customer satisfaction. We don’t forget about our team, and the long length of service of our employees in Poland shows that they also value work at SEGRO. In addition, we conduct training in the field of diversity, as well as run annual employee-satisfaction surveys.
The construction sector is rapidly catching up in terms of technology, with Building Information Modelling and PropTech changing the way buildings are erected and used. How far ahead is SEGRO when it comes to adopting innovation?

SEGRO’s facilities are technologically advanced from the very beginning of the project, thanks to the process of designing buildings with BIM – which is already standard in every newly constructed warehouse. Then, at the construction stage, we take care to use the best insulation materials for the building and for the docks to prevent heat loss as well as to install heat pumps to offer sustainable calefaction in the future. When the facility is in use, everyday work is facilitated by PropTech solutions, which additionally generate savings – forming a perfect combination of being budget-savvy and eco-friendly. An example of such a solution is the media monitoring system in the cloud, thanks to which the facility manager can monitor the level of energy and water consumption across several warehouses at the same time. In each SEGRO park, ordinary external lighting has been replaced with LED lighting. New buildings have LED lightning additionally controlled by the intelligent DALI (digital addressable lighting interface) system also indoors. In addition, we have implemented in our parks the automatic number plate recognition system which can shorten entry time for vehicles from two minutes to two seconds.
SEGRO functions as a UK real-estate investment trust, one that operates in Poland, where it generates returns for its investors. Poland itself lacks legislation permitting REITs to set up here, so we have a situation in which British, American, German or Canadian pension funds can invest in Polish property through REITs registered in their countries, whilst Polish pensioners can't benefit from their funds doing so at home. How do you see the prospects for Poland introducing a law that would permit the creation of REITs here? Is the lack of Polish REITs legislation an issue for foreign investors?
When SEGRO entered Poland, more than 16 years ago, REITs did not exist in our country - a situation that persists to this day. Nevertheless, the company has developed very well over time and we still hope to continue its growth. Despite the lack of REITs in Poland, there is a lot of interest from investors in the Polish warehouse market due to the strategic location of our country. The introduction of REITs could though further increase investors’ appetite on the Polish market. The issue of REITs regulation is being addressed by the Ministry of Development and Technology, which is working on a new law draft. We eagerly await the results of the legislative work, as we believe that an effective REITs system will have a positive impact on the development of the real estate sector.

SEGRO operates in eight countries, giving you a great perspective to compare the relative strengths and weaknesses of the real-estate sectors across those economies. How is Poland perceived by your UK headquarters?

To answer this question, you would have to ask our head office! I think, however, that this perception is positive, because we have developed a strong position in the market, thanks to which we have been in the top three players in Poland for years. Since the beginning of this year, we have been informing the market about new agreements, and many of them are lease extensions – we have high customer retention, and the vacancy rate is at a record low level of 4.5%. The stability of our company’s position is ensured by strategical location of our parks in the Warehouse Big Five: Warsaw, Poznań, Upper Silesia, Central Poland and Wrocław. These are the most desirable locations for which demand is constantly growing. All this contributes to the company's great results, as shown by 2021 and further growth.
Is Brexit affecting your business operations in any significant way? If so, how?

Brexit hasn’t affected cooperation with our head office in any way. On the customer level, however, we have had several cases of confirmed relocations from UK to Poland due to our country's excellent connectivity with all key markets in Europe, as well as competitive rents. This was for example the case of a distributor of integrated sliding doors moving to SEGRO Logistics Park Stryków and a manufacturer of protective clothing in SEGRO Logistics Park Poznan, Gądki.

SEGRO recently celebrated its centenary year – looking into the shorter-term future, how do you see the coming decade?

We are a strong company listed on the FTSE 100, with a disciplined way of investing exclusively in the warehouse sector. The coming years will be a time of modern solutions and new formats on the market. City warehouses are no longer spaces only for manufacturing or logistics, but are transforming into ghost kitchens, places for preparing meals, or even studios in the entertainment industry. For this reason, they must be more friendly and adapted to changing work environment – technological and ecological upgrades are implanted more and more widely.