Storage matters—both literally and figuratively

In an era of soaring inflation and rising warehouse rental costs, tenants are looking for ways to save money. Magdalena Kostjan, Leasing Director at 7R, explains where to look for savings—and where not to, as you might end up paying more.

How high are rents in Poland, and what factors determine their level?

Base rents in Poland currently stand at around 3–5 euros per square meter per month, and their level depends on the region, the type of property, and the lease term. In recent years, Poland has been the European region with the lowest rents, but in recent months we have seen an upward trend.

A war has broken out just across our eastern border. How is it affecting the warehouse market?

We are all grappling with limited availability and rising prices of construction materials. Investors are scrutinizing the market much more closely. But Poland remains attractive to them because, in addition to competitive rental rates, it still offers a sufficient supply of workers who, compared to other markets, remain cheaper. In my view, in the long term, Poland will benefit from its position as the easternmost country in the European Union. We are already seeing an increase in investment from China. For investors from Western Europe, on the other hand, Poland represents the last point where one can locate a distribution center to serve Eastern markets while still remaining in Europe.

So the situation might turn in our favor?

War is never conducive to business growth—except perhaps in the defense industry—but I always try to look for the silver lining. Just two years ago, everyone was terrified of the pandemic, which ultimately had a positive impact on warehouses thanks to the accelerated growth of e-commerce. The shift of many businesses online triggered a wave of new investments. This applied to both new projects as large as 50,000 sq. ft. and the expansion of already leased space. The changes we are facing now will significantly shape the warehouse market, and—as is always the case after a crisis—the market will mature.

But at first, there was uncertainty…

Yes, there was uncertainty related to the war, and the situation remains similar today. One of the consequences of the war is a further increase in the cost of construction materials. We all expected prices to stabilize after the pandemic ended, but then the crisis in Ukraine struck. The war has forced the entire supply chain to adapt to the new geopolitical situation we find ourselves in. Companies are working to shorten the supply chain and generate business in local markets.

Rental costs are also skyrocketing…

The increase in costs stems from an analysis of the market situation and is not a matter of profit margins. The rise in rents is a natural consequence of the changes we are all currently facing. It is worth noting in this context that rents in Poland have not risen for many years, despite a highly volatile business environment.

So where can you find savings? How can a tenant optimize costs?

When looking for a new location, tenants often focus on the lowest possible effective rent, believing that this will provide them with the greatest cost-effectiveness. However, this is not always the case. It is worth paying attention to many other factors that influence total costs. These include labor costs and transportation costs, which depend on the specific location. First and foremost, one must consider the type of business the tenant operates. A logistics company has different needs than a manufacturing plant or an e-commerce store. Every project is unique and should be approached as such. Collaboration between the client and the developer is crucial as early as the design phase, so that the solutions implemented translate into savings during the facility’s operation.

As for the maintenance fee, its main components are property taxes and building maintenance costs. For the most part, these amounts are not dependent on the tenants.

What about utility costs, which are constantly rising? Is there any way to try to reduce them?

Utility costs depend on consumption levels. This means that each tenant pays exactly what they use. It is worth noting, however, that while we have virtually no control over utility prices, we do have a significant influence on our consumption levels.

This is where modern systems and solutions come to the rescue. On the one hand, advanced technologies minimize the negative impact on the environment, and on the other, they reduce building maintenance costs. At 7R, we implement solutions such as: photovoltaic panels, LED lighting with DALI systems and motion sensors, improved insulation for walls and roofs, destratification systems, and modern heating and air conditioning systems for office and common areas with heat recovery. Implementing these elements requires an additional investment, but ultimately reduces building maintenance costs and, consequently, tenants’ bills. Given the long-term leases for warehouse and production space, the return on such an investment will certainly be significant. I would also like to add that 7R carries out its projects in accordance with its ESG strategy and builds in the spirit of sustainable development. We prioritize care for the natural environment, as well as the comfort of our clients’ work and the transparency of our processes.