Focus: Pandemic seen driving southeastern Europe warehouse boom

Sandhar Technologies

09/06/2021 08:35

* Manufacturers seen moving to southeastern Europe
    * Seek proximity to main EU markets
    * Romania, Serbia among main beneficiaries
    * Have lower production costs vs Czech Republic

    By Michael Kahn and Jason Hovet
    PRAGUE, June 9 (Reuters) - Logistics and warehouse companies
are accelerating expansion plans in southeastern Europe where
business is expected to boom as the pandemic spurs manufacturers
to relocate operations close to main markets.
    Like others in the sector, Dutch group Raben has seen
increasing interest from firms looking to establish supply
chains near core Western European markets to avoid costly
disruptions such as those caused by COVID-19. 
    Privately-held Raben Group-- which operates in 13 European
countries serving industries including retail and automotive --
expects rising costs elsewhere in emerging Europe to drive
growth in southeastern states and the Balkans.
    Raben and other industrial warehouse firms said they were in
talks with companies looking to shift some operations from Asia
and elsewhere but it was too early to share details.
    "Companies will return to Europe from Asia. We need to be
ready to take over when this happens," Raben CEE director Tomasz
Niezwicki told Reuters. 
    He said the company would open three new warehouse locations
in Romania this year to add to its portfolio of seven as it
speeds up its expansion plans.
    Setting up in European Union nations Romania and Bulgaria
represents a big selling point for these and neighbouring
countries like Serbia where it is often cheaper and easier to
get projects running, company officials and analysts say.
    The region's deep pool of skilled labour and less burdensome
permit requirements to build new facilities are helping to lure
manufacturers away from more established bases like the Czech
Republic, warehouse and logistic operators say.
    Improved roads and other infrastructure in Romania and
surrounding countries as well as developments like Britain's
exit from the EU and shifting relations with China have boosted
their prospects, they add.
    "These have the potential to bring in some manufacturing or
logistics activities in Romania, particularly if we regard that
labour costs in manufacturing, for instance, are comparable
between Romania and China," real estate company Colliers
International said in its 2021 outlook for the market.
    Foreign investors have also been drawn by yields on
industrial and logistics properties that hovered in 2020 between
8-10% for Romania and Bulgaria and 5-7% in Poland, the Czech
Republic, Slovakia and Hungary, Colliers said, compared with
4.5% in Germany or France.
    
    Wages around three times less in Serbia and about half as
much in Romania and Bulgaria compared with the Czech Republic
are helping to attract manufacturers, JLL real estate
consultancy's  JLL.N  Andrew Peirson said.
    "The big manufacturing requirements are moving south,"
Peirson, the consultancy's general manager for the Czech
Republic told Reuters. "Bulgaria, Romania and Serbia - they will
impact the whole of the region." 
    While central Europe remains attractive for retail logistics
and warehouse businesses due to proximity to bigger markets like
Germany, growth from online retailers such as Romania's eMAG are
also helping to boost warehouse demand. 
    Poland and the Czech Republic represent the biggest markets
in the industrial and logistics warehouse sector in emerging
Europe with 20 million metres and 9 million square metres of
warehouse space -- equivalent to about 1,300 football pitches --
compared to 5 million square metres in Romania.
    However, southeastern Europe is growing at a faster clip and
closing the gap. This has pushed industrial property developer
CTP  CTPNV.AS  to expand in the region.
    The company -- which posted a 73% year-on-year rise in first
quarter profit to 98.5 million euros ($120 million)-- acquired
95,000 square metres of buildings from Australia's Cromwell
Property Group last November in the biggest deal in the Romanian
logistics market in 2020.
    CTP Chief Financial Officer Richard Wilkinson said the
company planned to boost its holdings in Romania to near 2
million square metres by the end of 2021, part of an effort to
grow its whole portfolio to 7.5 million metres this year, from
just under 6 million held at the end of 2020.
     "We see strong demand in (Romania, Bulgaria and Serbia),"
he said. "We are starting to see companies looking to come back
from Asia and I expect that trend to continue."
    
    
    The industrial and logistics sector in Romania --
southeastern Europe's biggest economy -- grew by 43% in the
first quarter from a year earlier with 264,000 square metres of
new space leased to total 5.16 million square metres, according
to real estate consultancy CBRE.
    Dacia's  RENA.PA  deal to renew a 68,000 square metre
warehouse lease marked Romania's biggest deal of the first
quarter. Another 600,000 square metres of industrial space are
expected to be built in what is shaping up to be a record year,
said CBRE Romania Managing Director Razvan Iorgu.
    "Going forward we will see more manufacturing relocated to
Romania," he told Reuters, pointing out India-based car parts
maker Sandhar Technologies'  SNTL.NS  March arrival in Romania. 
  Ford Motor Co  F.N  also confirmed in April it would invest
$300 million to build a new light commercial vehicle starting at
its Craiova plant as evidence of growing manufacturing demand.
    "Last year retail drove the market and this year we are
betting on manufacturing," he added.   

($1 = 0.8221 euros)

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Romania's modern industrial stock    https://tmsnrt.rs/3ioDz7l
Prime yields in the CEE industrial real estate sector    https://tmsnrt.rs/3v063XI
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 (Editing by Emelia Sithole-Matarise)
 ((michael.kahn@thomsonreuters.com; +420 234 721 612; Reuters
Messaging: michael.kahn.thomsonreuters.com@reuters.net))