Warehouses matter—both literally and figuratively

In a time of soaring inflation and rising warehouse rental costs, tenants are looking for ways to save money. Magdalena Kostjan, Leasing Director at 7R, explains where these savings can be found—and where it’s best not to look if you don’t want to end up paying even more.

How high are rents in Poland, and what factors influence them?

Base rents in Poland currently average around EUR 3–5 per square meter per month, depending on the region, the type of property, and the lease term. For the past few years, Poland has been the European region with the lowest rents, but looking at the last few months, we can see an upward trend. However, it’s important to remember that rents in Poland are still relatively low compared to rates abroad—for example, in the Czech Republic or Germany. This means that we remain a country capable of offering attractive conditions for business development. That’s why the Polish market remains highly attractive to both investors and property owners.

The war across our eastern border has escalated. What impact is it having on the warehousing market?

So the situation might actually work in our favor

War is never a factor in business development, except perhaps for the arms industry. However, I always try to look for the positives. Just two years ago, everyone was frightened by the pandemic, which ultimately turned out to be a boon for the warehousing sector due to the rapid growth of e-commerce. The shift of so many businesses to the internet triggered a wave of new investment. This included both new projects of up to 50,000 square meters and increases in the size of existing leases. The changes, which we are still dealing with today, will significantly shape the warehouse market, and as often happens after a crisis, the market will mature.

But at the beginning, there was uncertainty… 

Yes. There was uncertainty due to the war, just as there is now. One of the consequences of the war is a further rise in the cost of building materials. Everyone expected prices to stabilize after the pandemic ended, but then the crisis in Ukraine broke out. The war means that the entire supply chain has to adapt to the new geopolitical situation we find ourselves in. Companies are trying to shorten their supply chains and generate business locally.

Rental costs are also skyrocketing…

The rising costs are the result of an analysis of the market situation and are not a matter of profit margins. Rising rents are a natural consequence of the changes we are all currently grappling with. It is worth noting that rents in Poland have not risen for many years, even though the business environment has changed significantly.

In that case, where can we find savings? What can a tenant do to cut costs?

To begin with, it’s worth asking yourself: what exactly make up rental costs? When signing a lease, you should pay attention to three factors: rent, service charges, and utility bills. You need to understand that a lease agreement will always include the base rent rate—also known as the headline rent—as well as the effective rent. The effective rent is the rent after any discounts offered by the developer. How these discounts are applied over time depends on the tenant, how they plan to use the space, and whether they need lower bills at the start of the lease due to factors such as moving costs.

When looking for a new rental location, a tenant often focuses on low effective rents, believing that this will result in the lowest overall costs. However, that is not always the case. It is worth noting that there are a number of other factors that influence total costs, including labor costs and transportation costs, which vary depending on the specific location. The first thing to consider is the nature of the tenant’s business. Logistics firms have different needs than manufacturing plants and e-commerce stores. Each project is unique, so each requires a tailored approach. It is crucial that the tenant and the developer collaborate during the design phase to ensure that the solutions implemented result in cost savings during the building’s operation.

When it comes to service charges, the main components are property taxes and building maintenance fees. These costs are generally not the tenant's responsibility.

And what about the cost of utilities, which keeps going up? Is there a way to keep it in check?

The cost of utilities depends on how much you use them. This means that each tenant pays for exactly what they consume. That said, it’s worth noting that even though we generally have no control over the cost of utilities, we do have a say—and a significant one—in how much we use.

This is where modern systems and solutions come to the rescue. On the one hand, advanced technology minimizes environmental impact; on the other, it reduces the costs of maintaining a building. At 7R, we have implemented solutions such as solar panels, LED lighting with DALI control systems and motion sensors, improved insulation for walls and roofs, destratifiers, and modern heating and air-conditioning units with heat recovery systems for office and common areas. While each of these systems represents an additional investment, they are designed to lower building maintenance costs and, consequently, reduce tenants’ utility bills.

Given the long-term lease agreements for warehouse and production space, the return on investment is sure to be significant. I would also like to add that 7R has an investment strategy grounded in ESG principles, and we build with a commitment to sustainable development. For us, it is important to protect the natural environment, ensure a comfortable working environment for our clients, and maintain transparency in our development processes.