Logistics sector in Poland is proving to be a Covid-19 silver lining for Redefine
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CAPE TOWN - Poland-based European Logistics Investment (ELI), which is 46.5 percent owned by Redefine Properties, plans to increase the size of its logistics portfolio in Poland more than three times over five to seven years due to strong demand being generated by e-commerce.
Poland has seen its new Covid-19 infections rise from 550 on September 1 to more than 13 628 last Saturday and temporary Covid-19 restrictions are in force for fitness clubs and swimming pools, while indoor restaurants operate only for take away orders and deliveries.
Redefine’s share price rose 5.86 percent to close on the JSE at R2.35 on Friday.
This followed the release of an update on its Poland Investment.
Redefine chief executive Andrew Konig said that the outlook for the Polish logistics sector was proving to be Covid-19’s silver lining, as it was driving demand for space close to urban clusters, the growing preference for e-groceries among consumers and a rethink of supply chains.
ELI has a Polish-focused logistics platform of about 527000m² of standing assets, 145 000m² of assets under development and more than 1 millionm² of potential development pipeline.
Although investor sentiment towards real estate has fallen dramatically through the pandemic as many, and particularly retail sector tenants struggle to pay rents, ELI was experiencing “exceptional demand” from tenants in the logistics sector, said Konig.
“We see potential to create a large and diversified portfolio with a mix of built-to-suit, inner-city, multi-tenanted and single-tenanted developments in prime nodes.
"In five to seven years, we plan to increase our Polish industrial assets to up to 2m² and target 1billion in gross asset value,” he said.
Occupier demand in Poland from e-commerce included small warehousing units in inner-city areas, and last-mile facilities close to urban centres.
Poland, due to its position in central Europe, was also becoming a significant logistics hub for international players, and was competitive compared with Western Europe in terms of rental rates and labour costs, said Konig.
Its real estate market was liquid with high-investor appeal and producing hard currency free cash flow, he added.
Since 2018, Netherlands-based ELI had developed eight assets, with another five under construction, and six under due diligence for future development.
Development buoyancy was also due to factors such as construction lead times that tended to be relatively short, as well as low capital expenditure.
“In times of volatility, assets that require smaller capital outlay are appealing because of their capacity to preserve investor returns,” he said.
ELI’s industrial sector had its best six months, until June 2020. Twenty deals of almost 1.2bn were recorded.
Prime warehouse yields stood at 6.25percent with quality, long leased assets trading at sub 5percent, and Warsaw inner-city projects at around 5.5percent,” said Redefine Europe chief executive Pieter Prinsloo.
“As the popularity of online shopping grows, the demand from occupiers will also increase. During the pandemic, consumers rediscovered the convenience of online shopping, even adding groceries to their checkout baskets. As retailers and logistics firms race to deliver a seamless experience and faster services, demand is likely to rise sharply for light industrial properties close to city centres,” said Prinsloo.
During the Covid-19 period some tenants also took short-term leases to secure additional space as a result of many companies holding greater amounts of inventory to buffer their supply-chain responsiveness.
Poland was also seeing a wave of new businesses wanting to move manufacturing away from Asia and closer to customers in Europe. The supply chain disruptions from Covid-19 was proving to be the biggest motivator, said Prinsloo.