Certificates, pre-let and electricity – what determines warehouse development? The new reality of warehouse investment is less risk, more requirements, writed Katarzyna Madej (pictured), Director, Industrial Agency at Avison Young.
Pre-let as important factor
Currently, the highest investment activity is observed in projects that have a pre-let secured at a level of at least 50-60 % of the space. This level of occupancy is often a prerequisite for the start of construction – developers today place great emphasis on reducing risk, making fully speculative developments rare.
The market has clearly become polarised. On the one hand, there are players such as GLP, CTP or Hillwood, which are still actively developing speculative projects – mainly in prime locations where demand is stable and predictable. On the other hand, there are developers who prefer the pre-let model, launching investments only after leases have been signed.
BTS (build-to-suit) and BTO (build-to-own) projects are still an important market segment, especially for tenants with specific technical requirements or who are interested in facility ownership. However, they are realised selectively, mainly by experienced developers specialising in bespoke solutions.
The revitalisation and conversion of brownfield sites is also gaining importance – particularly in the context of urban logistics and the limited availability of land in conurbations. Although their market share remains small, this trend is gradually strengthening.
So, the focus today is on projects with the right level of pre-letting, rather than a specific type of investment. It is the availability of the client and the level of security of tenancy that determines whether a project will go ahead – whether we are talking about a speculative facility, BTS or BTO.
ESG – no longer a competitive advantage, but a necessity
Green certifications such as BREEAM or LEED are increasingly becoming the market standard in the warehouse sector. It is now difficult to find a new project that does not include environmental certification already at the planning stage. A minimum level of BREEAM Very Good is now the norm, and most developers developing A-class facilities are aiming for Excellent.
BREEAM Outstanding-certified warehouses are also already appearing on the market, demonstrating the industry’s growing commitment to sustainability and the increasing ambition of developers. For investors, ESG aspects are becoming one of the key criteria – influencing not only the decision to commit to a project, but also its subsequent valuation.
It is worth noting that certification nowadays also has a measurable impact on financing. Banks financing investment projects are increasingly making loan conditions dependent on ESG scoring, in which environmental certificates play an important role. As a result, they are ceasing to be merely an image tool and are becoming a real value-building element for properties. In summary – environmental certification is no longer a competitive advantage, but a binding standard. In many cases, it is even a prerequisite for a project to be realised or sold.
Investment inhibitors
One of the most common barriers delaying the realisation of warehousing and production investments are protracted administrative procedures – especially those related to obtaining an environmental decision and a building permit. Most difficulties apply to production investments in large agglomerations, where environmental proceedings alone can take even up to 2 years.
The last 3 years have also shown how challenging it has become to secure adequate connection capacities – especially for companies planning to open production facilities in Poland. The increasing demand for energy, combined with the limited availability of developed land, makes it increasingly difficult to find a plot of land with quick access to electricity. The lead times offered by energy operators often reach several years, which significantly hinders a smooth start of the investment.
Additional barriers include:
• the lack of local development plans, which forces investors to obtain decisions on development conditions,
• complex administrative procedures, especially in the case of projects planned in the vicinity of residential buildings,
• unsettled property issues – including legal disputes, claims or the need to merge plots.
It is the production projects that most often face the greatest formal and legal challenges. The availability of infrastructure and the length of administrative procedures are now becoming key factors that have a real impact on the pace of investment.
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