„Even though the humanitarian crisis (of the war in Ukraine) is obviously affecting people at a personal level, I’m positively surprised that business-wise the situation is not so bad. In the sector we are in, there is such a positive trend that, although there’s some uncertainty in the short- to medium-term, the long-term outlook is still looking great” – Robert Dobrzycki, CEO & Co-Owner of Panattoni told Property Forum.
The positive side
About the uncertainty of inflation generated by the war Dobrzycki pointed out that the main problem is that it affects production costs and energy prices as well as land values, which are also rising. This results in increased costs for entire developments, and the rise in rents that tenants must be willing to cover. „On the positive side, whatever we build now is cheaper than what we will build tomorrow” – says the CEO of the leading industrial facilities developer in Poland.
About his expectations for the next 12 months on financing costs, Dobrzycki told: “There will be pressure on increasing financing costs, that’s for sure. And it will continue with inflation. Potentially, investors looking to acquire our products might experience a substantial increase in financing costs. But there is a huge investor demand so yields shouldn’t move up, they should continue to be low with a tendency to compress.”
Further expansion and accelerating investment demands
This situation in the region does not stop the development company from further investments – „We are constantly in the process of buying land and we will continue to do so. Recently we have expanded to a lot of new locations – Sweden, Hungary, Italy, France, Austria – and for the next 12 months, we’re focusing on trying to incorporate these locations into the system. At the same time, we might consider adding Belgium and a second Nordic country to the list in the second half of the year.” – Dobrzycki highlighted.
According to the expert, the investment demand in the CEE region will rise even though the next couple of weeks might be slower in Central Europe than in Western Europe due to the ongoings. „But this is a short-term thing and I think the market will fully restart and accelerate during the second half of the year and the total volume in 2022 will be higher than the previous year’s”- Dobrzycki told Property Forum.
Companies are expected to relocate to Central Europe
When it comes to industries, the main demand driver is e-commerce, but nearshoring – shifting production closer to the customer – is following close. „Companies are moving back from Asia or building new factories in Europe, including Central Europe, to serve the customer base here. And now what we’re starting to see because of the Ukrainian crisis, is that a lot of businesses will be moving out of Russia and Ukraine, and they’ll most likely relocate to Central Europe” – the expert predicts.
Sustainably finally makes financial sense too
Panattoni also constantly try to improve and ESG is a big portion of the company’s focus. “We are certifying all our buildings and we are trying to figure out what else can we do to be carbon-neutral construction-wise. We are now seeing that the value of certified buildings is substantially higher than non-certified ones, so building sustainably finally makes financial sense too. Investors are willing to pay more for an environmentally friendly building.” – Dobrzycki points out.