Poland: More focus on costs for potential logistics tenants

Lease negotiations are taking longer than they did a few months ago in Poland’s logistics market but, just as in other European markets, there is still plenty of interest from potential tenants states logistics property developer LCube’s Adrian Biesaga.

Tenants are looking harder at costs now. “When they are negotiating they want to make sure that the cost of the services, the cost of the warehouse will not increase,” Biesaga told Real Asset Insights Richard Betts. Sometimes they want to put a cap on service charge increases and they make a decision based on very detailed analysis.

Demand is still relatively good there is increasing demand for production space rather than the typical logistics areas and there are more technical issues raised as a result.

“We have to provide more detailed information, more detailed analysis of the cost of tenant improvements,” he said

“However, these kind of leases are much more interesting as they are longer the rents are slightly higher,” he added.

The capital market has also slowed in Poland as in the rest of Europe. “There were literally two transaction in the first quarter in Poland.”

However, the last few months have seen increased interest from investment funds. “We can see that probably the situation may be getting slightly better towards the end of the year and we are all expecting that the new year will bring some sort of stabilisation,” Biesaga said.

ESG is becoming a more important aspect of negotiation with both funds and tenants.

“We are providing ecological solutions,” he said. “But now we can see the companies are also focusing on the social part [of ESG] so basically they are interested in whether our buildings will provide a good facility for their employees to work in.”

Governance is also becoming more important from the banking and capital market’s point of view.0

“We’ve got our policies regarding suppliers, regarding choosing the general contractors, ethical values etc so we can see the increased interest in it and we know that every building we are now providing has to be future proof. We have to include all the elements, including the S and G.”