Industrial Market Review Eastern Europe

Transcription

1 Industrial Market Review Eastern Europe Modern Logistics Stock EE [million m²] INTRODUCTION The following report provides an overview of industrial market trends across the Eastern European region, with a focus on spatial distribution and development. Activity remains concentrated around the larger centres of population and economic strength, with markets such as Moscow, Warsaw, Prague and Budapest providing the largest volumes of modern stock. Aside from these key city locations, there is a clear clustering of activity around the industrial regions of Poland, the Czech Republic and Slovakia. These locations benefit from proximity to their feeder markets in Germany and Austria in particular, helping drive demand for space from regional distributors, manufacturers and retailers as well as those facilitating the national market. Outside of these locations, only Athens, St Petersburg and Gdansk (Tricity) have a wider distribution role to play as major European trading ports, which escalates the volume of activity in these specific markets. Gdansk and St Petersburg are yet to fulfill their potential. Elsewhere, demand for space is driven primarily by occupiers with local and national distribution needs to satisfy the domestic economy. For this first time, we can also illustrate the importance large Russian cities with a population of over 1 million, to the entire Eastern European market. These cities will have an increasingly important role to play, as improving external trade linkages open up the European continent to the east. Modern Logistics Stock Map : Eastern Europe 1 COLLIERS INTERNATIONAL

2 Gross Take-up: 2012 [m²] RECENT MARKET ACTIVITY Aside from plotting new Russian cities on the map, the distribution of activity in central and south east Europe has barely changed over the last two years. Current take-up rates provide an accurate reflection of recent activity in both proportionate and absolute terms. This is particularly so, given the lack of new speculative development in a market dominated by pre-let and built-to-suit demands. Naturally, Moscow and Warsaw dominate the region as the busiest locations. Outside of these two cities, it is clear how much the other major industrial regions of Russia, Poland, the Czech Republic and Slovakia dominate activity. Outside of these countries, only the major cities of Kiev, Budapest and Bucharest feature in the top half of the table - cities with much larger populations than the likes of Bratislava or Pilsen. This highlights the extent to which locations in Poland, the Czech Republic and Slovakia continue to be driven by demand for space from regional distributors, manufacturers and retailers with proximity to Germany and Austria. An analysis of take-up as a proportion of existing stock, exemplifies this trend. Whilst a take-up rate of 10% would denote a healthy market - putting most locations into positive trading territory - the top most active locations in relation to size are all in Poland, the Czech Republic and Slovakia. The only exception is Nizhny Novogrod in Russia, some 350km to the east of Moscow. Annual Take-up/ Stock: 2012 [m²] 2 COLLIERS INTERNATIONAL

3 Helsinki Corridors and Freight Routes NEW MARKET DEVELOPMENTS In our report of 2010, we forecast Slovakia would see a marginal increase in demand outside of Bratislava by This has been realised with new leasing and development activity in Kosice, Presov and Zilina, although these markets remain small-scale in the grand scheme of things. We also suggested Northern Hungary will start to see the benefit of new infrastructure improving proximity to Austria and Germany, helping to drag demand south. Whilst this has yet to translate into a flux of activity for modern space in these areas there are signs that the area is seeing growth in enquiries, leading to increasing levels of activity. 1. North-South (Helsinki/ Gdansk) 2. East-West (Berlin/ Nizhny Novgorod) 3. Brussels Kyiv 4. Dresden Istanbul 5. Branches Bratislava/ Rijeka/ Ploce 6. North South (Gdansk Katowice) 7. Danube River (NW/SE) 2,300 km 8. Helsinki Alexandroupolis 9. St Petersburg Kies 10. Salzburg - Thessaloniki Hewlett Packard, for instance, announced in October 2012 that it will create a new distribution route sending goods to Europe via the port of Piraeus in Athens, which will then dispatch over 20,000 containers to their regional distribution centre in Sopron, northern Hungary, via rail. Goods will then be transported on to the markets of central and eastern Europe, saving total travel time of 5-7 days and thus operating costs. This incorporates one of our other longer-term predictions, that rail freight would feature more in the logistics supply chain, providing particular benefits to locations in Eastern Europe. The question is will this HP deal be the start of things to come? What else will impact the development of the market over the next 5-10 years? FUTURE TRENDS We d say there are three main trends which will impact demand for, and supply of, modern logistics space over the short, medium and long term: C0² Emissions by Transportation [gco²/ tone/ km] 1. Growth in rail freight distribution. 2. Demand growth driven by retail sales and manufacturing/distribution. 3. E-tailing and design implications. 1.) Growth in rail freight (Longer term): Rail freight is growing in stature and importance to service the needs of logistics and 3PL operators over longer distance journeys of 300km+. This shift is driven by practical cost savings and EU policy wanting to reduce CO² emissions from road freight. EU policy targets is to see 50% of 300 km journeys shifted from road to rail or inland waterway by Equally, ever since oil prices peaked at US$147 barrel in 2008, the EU is particularly keen on reducing the econ-political costs of oil dependency. A brief review of new freight infrastructure initiatives funded by the EU via the Marco Polo program, shows 65% were for rail based initiatives linking east, north, west and southern Europe. This is only one example of a growing line of schemes developing rail freight as a genuine middle-long distance transport mode across Europe, Overall, new measures being introduced will facilitate 28 billion freight tonne-kilometres each year to be transported by rail rather than road, linking Europe with other key trading locations in the CIS, Asia and Middle East. Source: ADEME, Detra, ifeu Many blue chip retailers and manufacturers are now promoting their use of rail freight for longer-medium haul distribution, such as Hewlett Packard. H&M has been doing this for some time now, with rail-freight routes operating from Turkey to Poland, Germany and Belgium. 3 COLLIERS INTERNATIONAL

4 Trade in Goods: 2005/ 2010/ f2014 [million ] 2.) Economic, retail and manufacturing growth (Short-Medium Term): While dramatic changes in Western Europe s distribution of GDP are not expected in the next decade, rising economic growth in Eastern Europe will give rise to the need for changes in the logistics infrastructure that serves it. The concentration of activity in places such as the Czech Republic and Poland is set to continue, with pockets of growth in Slovakia and Hungary set to rise, alongside locations in Romania. Growth in consumer spending in these countries will drive goods to these locations, making direct supply chains more scalable and cost efficient helping, driving improvements and growth in national logistics markets. Equally, low wage rates, strong transport links with Germany and central Europe, and independent, floating currencies will prove key in driving manufacturing growth in Eastern Europe in the short to medium-term. Eastern Europe will, however, face stiff competition from other European locations for new manufacturing and production, all of which are targeting increasing unemployment and investment. Source: ING FM Research Further afield, growth in exports from Russia, Turkey, the Far and Middle East, as well as from countries such as Kazakhstan in the CIS, will increase the need for key distribution points for these exports heading into Europe. The capacity, cost and scalability of locations in Eastern Europe, which can then service other European locations, will be critical in underpinning the future spatial development of the market in due course. Forecast Growth 2020: Retail Sales & Manufacturing [billion ] 3.) E-tailing (Short-Medium Term): The internet has transformed the way people consume. The customer purchase journey is now more complex and they have multiple channels through which shopping can be done. However, many retailers are lagging, not leading, the multi-channel trend and this is even more pronounced in Eastern Europe. Many retailers lack a central database for managing customer information across channels. Some retailers have inherited business models and cultures focusing entirely on running an efficient shop operation. Although this reduces the speed at which e-tailing develops, it will continue to grow, impacting logistics demand. Whilst e-tailing will support demand growth for modern warehouse space, the multi-channel trend has fractured the traditional logistics model of delivering to high street stores into a complex range of interrelated activities. These include lower quantity deliveries, single pick capability, managing returns, direct to home deliveries and running multiple warehouse operations. In many instances the speed of change has overtaken existing operational systems and capabilities causing problems and high costs for retailers and logistics providers alike. This is impacting logistics park design, with longer and narrower crossdocked buildings proving more popular with retailers and 3PLs, allowing them to support both BTB and BTC business. Such facilities typically help occupiers reduce holding periods of goods, providing customers with quicker delivery times. They are also potentially easier to divide, and allow for collaborative use of space and collaboration is moving up the agenda as occupiers seek to reduce their carbon footprint and to maximise efficiencies in the supply chain. 4 COLLIERS INTERNATIONAL

5 SUMMARY FUTURE TRENDS: 1. Growth in rail freight distribution, over mediumlong distances. 2. Demand driven by growth in retail sales, manufacturing/ and distribution across the region. 3. E-tailing and design implications. Overall, the large increases in the scale of consumption and production in Eastern Europe in the next decade and beyond, combined with increasing levels of exports coming into Europe via Eastern Europe, will begin to exert increasing pressure on supply chains. This provides certain Eastern European locations with an excellent opportunity to grow, not only to serve national logistics needs, but to function as bases from which other European locations can be served. The ability to efficiently connect to rail freight services will become increasingly important for logistics providers looking to service key trading points in Europe with the CIS, Asia and Middle East. This will help drive activity into locations suitable for regional distribution, such as Belgrade and/or Nis in Serbia. Locations which have limited modern warehousing facilities but which act as a natural hub between Europe and Turkey, and as a regional distribution point for the Balkans and South East European subregion. In terms of development, new projects will be built primarily on specific builtto-suit, design and build terms or on a pre-let basis where the consumer has a design/layout input. Speculative space should be highly divisible, so retailers can explore space sharing, supported by a 3PL.. Although figures for institutional investment in modern warehousing in Eastern Europe show no significant growth in the last few years in proportionate terms, investor interest is on the increase for strategic logistic facilities. The market has the potential to continue to deliver logistics parks comprising high quality, divisible space. Schemes which benefit from a strategic location with high quality multi-modal infrastructure linking road and rail freight networks, will create even stronger core assets for the institutional investment market. In turn this should encourage interest from investors such as Norway s sovereign wealth fund which made its first acquisition in the European sector in 2012 purchasing half of a portfolio through a joint venture with Prologis. Key Country Markets Total Stock (thousand m²) Key Market Metrics: Q Active Pipeline (thousand m²) Vacancy Rate (%) Prime Rent ( m²/month) *in US$ Prime Rent (%, y-o-y) Moscow 8, * 0% Athens 2, % Warsaw 2, % Budapest 1, % Prague 1, % Kiev 1, % St. Petersburg 1, * 0% Bucharest % Bratislava % Sofia % Zagreb % 5 COLLIERS INTERNATIONAL

6 COLLIERS RESEARCH 512 offices in 61 countries on 6 continents United States: 125 Canada: 38 Latin America: 18 Asia Pacific: 214 EMEA: 117 $1.5 billion in annual revenue million square feet under management Over 12,500 professionals EASTERN EUROPE: Damian Harrington, MRICS; MSc Regional Director - Research & Consulting Eastern Europe Regional Team CEE Investment Services Mobile Main damian.harrington@colliers.com Juliane Priesemeister, MSc Regional Research Analyst Research & Consulting Eastern Europe Regional Team Mobile Main juliane.priesemeister@colliers.com The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers Research Services Group is recognized as a knowledge leader in the commercial real estate industry, providing clients with valuable market intelligence to support business decisions. Colliers research analysts provide multi-level support across all property types, ranging from data collection to comprehensive market analysis. Across the Eastern European region of EMEA, Colliers researchers regularly collect and update data on key real estate metrics, set to consistent definitions bringing greater transparency and reliability to our real estate market analysis in the region. In most Eastern European markets, the office definitions used are consistent with those set out by the CEE Research Forum an umbrella group, of which Colliers is a founding member. Definitions of the key metrics used in our regular reports are highlighted below. KEY METRIC DEFINITIONS Prime Net Initial Yield: The yield an investor is prepared to pay to buy a Grade A building, fully-let to high quality tenants at an open market rental value in a prime location. Lease terms should be commensurate with the market. As a calculation Net initial yield = First years net income/purchase price (prior to deducting fees and taxes) Prime Headline Rent: Represents the top open-market tier of rent that could be expected for a unit of standard size commensurate with demand, of the highest quality and specification in the best location in the market at the survey date. This should reflect the level at which relevant transactions are being completed at the time but need not be exactly identical to any of them, particularly if deal flow is very limited or made up of unusual one-off deals. If there are no relevant transactions during the survey period, the quoted figure will be more hypothetical, based on expert opinion of market conditions. The figure excludes service charges, taxes, and tenant incentives. Prime Net Effective Rent: Prime Net Effective Rent is the lowest rent payable, based on a calculation of the Prime Headline Rent, less the monetary value of the discount achieved through landlord incentives inc. rent-free periods and/or fit-out contributions. Total Occupational Market Activity (Take-up): Total Occupational Market Activity is the total floorspace known to have been let or sold as one of the following activity types during the survey period: Pre-let, New Occupation/Lease, Renewal/Renegotiation, Expansion, Sub-lease and Sale & Leaseback. Net Take-up: Net Take-up represents the sum of all Total Occupational Market Activity categories which represent a net increase in demand for space. This would only include the following activity types: Pre-lets, New Occupation/lease, Expansion Total Competitive Stock - Offices: Includes the gross leasable floorspace in all A and B class buildings, including owner-occupied buildings but excluding government owned properties. Anciilary office space is only included if it can be reasonably used independently of the primary use of the building in which it is located. Total Competitive Stock - Industrial: Includes the gross leasable floorspace in all A and B class buildings, including speculative, Build to suit and owner-occupied stock. Other reference points include that the building must be heated and have a clear usable height minimum of 6metres. This includes both warehouse (500m2+)& bulk space (10,000m2+). Total Competitive Stock Retail Shopping Centres: Split into two categories Traditional & Specialised as per ISCS definitions. Traditional includes retail properties that are planned, built and managed as a single entity, comprising units and communal areas with a minimum gross leasable area (GLA) of 5,000 square metres. Specialised A specialised shopping center is defined as a specific, purpose-built retail that is typically open-air with a minimum gross leasable area (GLA) of 5,000 m2. This includes Retail Parks, Factory Outlet Centres and Theme-Oriented Centres. Space Under Active Construction: Represents the total amount of gross leasable floorspace of properties where construction has commenced on a new development or where a major refurbishment/renovation is ongoing at the survey date. Vacant Space: The total gross leasable floorspace in existing properties that meet the Competitive Stock definition, which is physically vacant and being actively marketed at the survey date. Space should be available for immediate occupation. 6 COLLIERS INTERNATIONAL