For an Edge in the European Logistical Race, Companies Look East

By Peteri @ Shutterstock.com

When arriving in France and immediately driving away from Charles de Gaulle airport, it’s hard to miss all the warehouses/distribution facilities on your way to Paris. I found this article interesting as companies battle for logistics superiority by building in more affordable Eastern and Central Europe. The WSJ’s Isobel Lee explains:

The industrial real-estate market is booming in Central and Eastern Europe, thanks to the region’s geography and cheap labor along with the benefits of Europe’s unified currency and lack of trade restrictions.

Developers are adding new warehouses and distribution facilities at a record pace. The math is simple: the facilities can be built and operated at low cost in countries like Poland or the Czech Republic and still serve affluent markets of high-cost countries such as Germany, Switzerland and France.

Rents for modern industrial space in Poznan, Poland, are about €3.50 euros ($4.09) a square meter compared with €5 a square meter in Berlin, 170 miles to the west, according to JLL data.

This disparity has attracted some of the world’s largest retailers. Amazon.com Inc. AMZN 1.87% operates five high-tech fulfillment centers along Poland’s border with Germany, in Poznań, Szczecin and Sosnowiec, plus two in Wrocław, and it plans further expansion.

By contrast, the e-commerce giant has four fulfillment centers in Italy, a country with a population of more than 60 million, compared with less than 40 million in Poland.

Domestic and foreign investors have also paid attention to the trend. About 3.7 million square meters (40 million square feet) of new space was added in 2017, a 68% increase over 2016 and 55% more than the record amount, which dates to 2007, according to broker Cushman & Wakefield Inc.

“This is the right place for us to be,” said Robert Dobrzycki, chief executive of Europe for Newport, California-based Panattoni Development Company Inc., which built about 38% of the new supply in Central and Easteern Europe last year. Other players include Prologis Inc. (based in San Francisco in the U.S. and in Amsterdam in Europe) and P3 Logistics Parks, owned by Singapore’s sovereign-wealth fund GIC Pvt. Ltd.

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E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.