JAN 2007
VOL. 2 
All the World's A Warehouse
All those flat-screen TV monitors
that flew off the shelves during the recent holiday season
took a long journey. To
bring these electronic goodies, as well as appliances, industrial
equipment, clothing and furniture to consumers and businesses
requires a complicated logistical dance. Often, the chain stretches
from factories in the interior of China to warehouses in Shanghai
to container ships, to trucks and then to staging facilities
in places such as Riverside, Calif., or Bratislava, Slovakia,
from which the goods are then transferred again to retail outlets.
The complexity of these global supply chains has spelled opportunity
for real estate investors, who have followed demand for industrial
space around the world. To accommodate the movement of
goods, increasingly from Asia, developers in Europe and United
States have added a lot of distribution capacity to meet demand.
However, the opportunities are shifting. Developers in the U.S.
have been adding space at a rapid pace. Completions in the sector
increased by almost 15% in 2006, according to Sam Chandan,
chief economist at REIS, a market researcher. Fortunately, demand
for warehouse space remained relatively robust, says Ross Moore,
senior vice president of market and economic research for Colliers
International Property Consultants .But in 2007, it looks like
developers may race ahead of demand. “We will build 205
million square feet of space,” he says. “At the same
time, nationally we will absorb 180 million to 190 million square
feet of space.”
Investors in industrial properties may find better prospects
in Europet, where economic growth is improving and there is need
for new distribution networks to deliver goods throughout the
growing European Union. In addition, there is a need for more
up-to-date logistics facilities across the continent.
There are two ways to look at Europe in terms of industrial development:
at the ports and at places that handle interior distribution.
Two of the world’s largest owners of industrial properties,
San Francisco-based AMB Property Corp. and ProLogis in Denver
both like Europe’s industrial market potential, but each
has taken a different tack.
AMB prefers the port approach and has been very active in the traditional
northern ports of Rotterdam, Netherlands, and Hamburg, Germany.
“We recently acquired a half million square feet of space in Hamburg,” says
Kim Snyder, a senior vice president and managing director with AMB. “Overall
in Hamburg, we have 1.4 million square feet and we are about to acquire another
half million. That would make us the largest landlord of industrial space in
the city.”
Snyder says his company is also very active in Rotterdam-Amsterdam. “We
have close to 3 million square feet in this market cluster. It
is a very productive area for us and we continue to acquire as
well as build facilities.”
Further to the south in Belgium, sits another busy cluster, the
seaports of Ostend, Zeebrugge, Ghent and Antwerp, which form
one large trading area and is home to 400 distribution centers
including those operated by Nike, Sara Lee, Pioneer, Samsung
and Black & Decker. According to a summer 2006 Cushman & Wakefield
report, it costs 43 euros per square meter annually to rent space
in Ghent making it about the cheapest distribution market in
Europe. London, the most expensive, stands at 200 euros per square
meter annually.
Not all port activity is concentrated in northern Europe. In
Slovenia, the up-and-coming small port of Koper has experienced
terrific growth and could eventually become another gateway for
shipping into Russia. Koper still has a long way to go. Although
container traffic double from 2001 to 2006 to 200,000 TEU (20-foot
equivalent unit), in Antwerp, for example, container handling
capacity has also doubled to 12 million TEU.
Central Europe, however, is the next great market for distribution,
and this would include all the countries created from the old
Soviet Bloc, from places like Slovenia and Serbia in the south
through to Estonia and Latvia in the north.
“This is all about catch-up,” exclaims Michael de Jong-Douglas,
ProLogis’ senior vice president for Central and Eastern Europe in Warsaw,
Poland. “If you look at the number of square meters of warehouse and
distribution per capita, the markets are underserved compared to Western Europe.”
ProLogis has been very active in Central Europe, but solely in
Poland, Hungary, Czech Republic and Slovakia. Last year, ProLogis
began development of its first facility in Romania, acquiring
69 acres of land outside Bucharest.
In Poland, ProLogis is the largest provider of industrial space
with 8.5 million square feet: three parks in Warsaw and two more
under construction; two parks in the western part of the country
and another being completed; plus five more parks either completed
or under construction elsewhere around the country.
ProLogis Park Chorzow, in the southern Polish city of Chorzow, will create
1.6 million square feet of space when complete. In mid-2006, ProLogis signed
leases of 309,000 square feet with Raben Group, a European third-party logistics
provider; 188,000 square feet with FM Logistic, a French-based logistics provider;
144,000 square feet with Reporter, a Polish clothing company; and 133,000 square
feet to Tesco, a UK retailer.
Indeed, ProLogis’s European business has become so significant
that last September it floated a €2.7 billion public offering
on the TK Exchange for ProLogis European Properties.
ProLogis and AMB often build where its clients want to be. Tesco’s
expansion plans in eastern Europe, where it operates hypermarkets
and convenience stores, helped drive development of ProLogis
Park Teresin (outside Warsaw). The retailer acquired a building
in the 1.7 million-sq.-ft. project and is also leasing space
from ProLogis in the Czech Republic and United Kingdom.