This Polish Developer Wants A Big Bite Of The U.K. Warehouse Property Scene

Polish-based warehouse developer Panattoni Europe is launching a massive development programme in the U.K. The move follows a tie-up with local player First Industrial.

The new business has a £300M war chest to acquire new sites as it heads toward a 3M SF/year development pipeline.

It is a mighty challenge to the U.K.’s existing warehouse property players.

Panattoni expanded from the United States into Europe in 2008, choosing Poland as its base. It has since built 4.9M square metres of logistics floor space, with 2M square metres still under management. It is active in Germany, Romania and Slovakia and the Czech Republic and boasts an impressive client list: last month Amazon Deutschland moved into a 113K SF Panattoni Europe unit at Dusseldorf Hafen.

Its partnership with First Industrial allies Panattoni with one of the first new entrants to the U.K. after the 2008 downturn. It quickly made a name, and in 2011-12 project managed Marks and Spencer's 900K SF Castle Donnington warehouse with Clowes Developments. First Industrial has also partnered with the Co-op, Sainsbury’s, DHL and Amazon.

The U.K. warehouse market is already hypercompetitive: Prologis, Goodman, Segro and Logicor are just a handful of the dominant names. The only way to break in is to go big. 

For Panattoni, that will mean about 3M SF of construction a year, Panattoni Development Corp. Director Dudley Mitchell said.

“To penetrate these capital-intensive markets, you need to bid aggressively and spec build. We see the U.K. market with potential for 3M SF of new-build product a year, but we’ll need to upscale the First Panattoni platform to meet these demands.”

These major players are all drawn to stellar fundamentals in U.K. industrial product.

First Panattoni Managing Director Matthew Byrom said, “From an international perspective, the U.K. still remains a hugely attractive place to invest in real estate, with its long leases and strong balance sheet customers. Couple this with the rental growth we’ve seen across the country, and the continued growth of the e-commerce phenomenon, the interest in this sector is likely to continue.”

Cushman & Wakefield's U.K. Industrial and Logistics Market Outlook for spring 2017 said, “Total returns for the industrial and logistics sectors should outperform those for office and retail, supported by stable income returns.”

According to MSCI U.K. data, total annual returns for distribution warehouse rose slightly in Q4 2016 (6.1%), then more significantly in Q1 2017 (8.2%).

Pro tip: Panattoni is an industrial property developer. Panettoni is a cake.