Australian-based logistics giant Goodman has seen its portfolio in Central and Eastern Europe expand by 40% in the past six months, largely due to rising consumption levels and a buoyant retail sector in Poland.
Australian-based logistics giant Goodman has seen its portfolio in Central and Eastern Europe expand by 40% in the past six months, largely due to rising consumption levels and a buoyant retail sector in Poland.
The CEE portfolio reached 697,000 m2 at end-2014, with Poland accounting for 95% of the 222,000 m2 of warehouse space that is currently under construction in the region.
‘We do not expect to maintain the same pace of growth in 2015 but we certainly have strong expectations for business activity in Poland this year. We have established a strong presence and have a very good land bank,’ commented Philippe Van der Beken, managing director of continental Europe at Goodman.
Most development activity – which reached 300,000 m2 in the region last year - is build to suit but the company feels confident enough to kick off a number of projects on a speculative basis, he added. In total, around 53,000 m2 of speculative developments are currently being undertaken, including the Goodman Senec Logistics Centre near Bratislava in Slovakia.
‘The construction of speculative investments in key logistics locations is an important part of implementing Goodman’s strategy in Central and Eastern Europe,’ Van der Beken added.
New lease contracts recently allowed Goodman to launch the construction of two new logistics centres in Poland - in Wroclaw and Poznañ. The company signed a 13,000 m2 lease agreement at the Kraków Airport Logistics Centre with logistics operator KMC Services and another 25,000 m2 at the Pomeranian Logistics Centre in Gdañsk for an FMCG distributor
In 2015, the company expects to deliver 82,000 m2 logistics and an office facility in Poznañ for the Mousquetaires Group, as well as a 16,000 m2 warehouse at the new Poznañ Airport Logistics Centre and a 33,400 m2 facility in Lublin.
Pockets of growth
Goodman has benefitted from strong activity even in low-growth European countries over the past 12 months, Van der Beken added. ‘There are pockets of growth in every country and the business is benefitting from the general search for operating efficiencies by companies and customers in general. Restructuring of logistics networks and operations is a theme that we see across Europe and is the biggest contributor to our activities.’
For instance, Goodman is helping WMF consolidate 33 existing locations into two new international hubs, of which one will be operated by DB Schenker. Additionally, Goodman is developing a new modern, flexible logistics space for Hellweg to help realign its logistics operations. In total, Goodman concluded 24 deals in Germany last year, representing 700,000 m2.
Goodman’s operational performance is being driven by a strong development pipeline which stands at A$2.9 bn (€2 bn) on a global basis at end-December 2014, with Europe accounting for a 20% share of the total.
The company reported an operating profit of A$327 mln in the past six months, up 10% on the same period a year earlier. Its total assets under management rose by 10% over the past six months to A$29.4 bn, reflecting increased valuations arising from the demand for quality and well performing industrial assets. The occupancy rate across the portfolio stood at 96% at year-end 2014, with a weighted average lease expiry of 4.8 years.
Capital recycling
To capitalise on strong demand for logistics assets as well as ongoing pressure on logistics yields, the company plans to recycle some capital through asset sales over the course of 2015, Van der Beken added.
‘We sell assets from our balance sheet and from our funds, to free capital and invest in new developments. The buoyant market combined with ongoing pressure on yields will continue to create opportunities for capital recycling and we will certainly be trading some assets in our funds.’ He continued: ‘In terms of acquisitions, there will only be mild activity because the market is very competitive at the moment so our strategy will remain development-led.’