Colliers, a leading advisory company providing a wide range of professional services in commercial real estate and investment management, has published a report Small Business Units: Small warehouses with great potential. The publication answers a number of important questions about this segment of the industrial market, such as: what has changed in recent years, what are the reasons for accelerating the development of this sector, and why and for whom is the SBU format attractive? Attention has also been paid to the needs of tenants in terms of location, technical specifications and lease conditions for this type of facilities. The report has been prepared in cooperation with 7R, Ideal Idea Formad and SEGRO.
SBU - Small Business Units
For many years, the SBU segment in Poland has existed in the shadow of big box warehouses. However, this format has always shown great potential, which is now increasingly seen by market players.
As the name suggests, SBU facilities consist of small business modules offering great flexibility. Such projects appeared on the Polish industrial market in the second half of the 1990s, first in Warsaw and, after 2004, also in other locations.
“For a long time, SBU warehouses were defined as being a 500-600 sq m module, located in a building dedicated to this formula or within a larger warehouse complex. Currently, an SBU is defined mainly as having a set of features and possible functions that such a space can provide to tenants,” says Dominika Jędrak, Director of Research and Consultancy Services at Colliers.
“SBU is an area located on the outskirts or in the vicinity of cities or business centres, with convenient access to public transport and main roads, thereby ensuring fast delivery. SBU facilities, unlike standard ‘big box’ warehouses, may consist not only of industrial and office space, but also showroom and retail premises,” says Maciej Chmielewski, Senior Partner, Director of Industrial and Logistics Agency at Colliers.
The majority in Warsaw
The supply of SBU warehouses in Poland amounts to approximately 1.7 million sq m, which accounts for 8% of the total modern industrial space stock in the country (21.4 million sq m). More than half of SBU space (51%) is located in Warsaw, 24% in Central Poland and only 25% in the other parts of Poland. At present, the largest number of SBU investments is being developed in Poznań and Wrocław (nearly half) and in the vicinity of Warsaw and Tricity (nearly one fourth).
“Our company is planning investments both in Warsaw and Wroclaw,” says Aleksander Kobyliński, Leasing & Property Manager, Ideal Idea Formad and adds: “The capital has for many years proved its attractiveness for investors who decide to build or purchase SBU facilities. Our plan is for Ideal Idea to mark its presence in more than one place in Warsaw. On the other hand, the Wrocław market is just developing in terms of SBU investments. This region, thanks to its strategic location in Poland and excellent higher education institutions that provide a well-educated workforce, is an attractive location for companies with both Polish and foreign capital”.
Close to the client
The COVID-19 pandemic has had a significant impact on the accelerated development of the e-commerce sector, which is reflected in the Polish industrial market mainly by the increased demand in the big box segment. Companies from this sector are primarily interested in warehouse space ranging from several thousand sq m to even several hundred thousand sq m. However, according to experts, the dynamic development of e-commerce will also translate into the growth of the small warehouse market, where smaller companies from this industry locate.
“The COVID-19 pandemic, which accelerated the development of e-commerce in Poland, at the same time contributed to a greater interest of companies in industrial space, also in urban agglomerations. One of the key issues in the post-pandemic reality is the need for companies to develop solutions to maintain continuity or even shorten supply chains so that they can run smoothly and that the growing needs of consumers related to increased activity and the expectation of quick delivery are met, e.g. by strengthening the omnichannel or Q-commerce,” says Waldemar Witczak, Regional Director at SEGRO.
Currently, warehouses located close to the target customer are becoming an increasingly desirable asset class and everything indicates that this trend will continue. Small formats of city logistics will continue to be the predominant domain of large, stabilised markets, but this format also has the potential to be successful in smaller cities.
Different types of tenants, different expectations
The tenants of SBU space are largely:
- retail chains looking to have quick access and the ability to deliver goods to customers in cities, both in B2B and B2C modules, and create showrooms in the warehouse;
- logistics operators specialising in city logistics;
- courier companies;
- small and medium-sized enterprises operating in cities, acquiring new space for their activities;smaller companies from the e-commerce sector.
Other, less typical tenants/ways of using SBU warehouses include smaller data centres for companies wishing to have their servers in the city in which they operate. In this case, however, the space requires greater technical adaptations which are not possible in every building.
“The Small Business Unit facility is an ideal space format for a wide range of sectors, because it skilfully combines high-class office space with versatile and easily adaptable warehouse space. Thanks to its flexibility – the high hall offers a large space – this type of space can be easily adapted to many functions and non-standard solutions. Due to the location of SBU warehouses within cities, companies for which the most important thing is to quickly reach their customers are interested in them. SBUs allow them to get closer to their customers and optimise the processes of the last mile logistics,” says Maciej Krawiecki, Head of Leasing, 7R SA.
The profile of tenants has an impact on the size of the space they lease. The analysis of contracts signed between 2016 and 2021, made by Colliers experts, shows that almost half concerned the lease of modules with a size between 500 and 2,000 sq m, nearly 40% were between 2,000 - 10,000 sq m. Units under 500 sq m accounted for only 12% of leased space. New leases prevailed (51%) among the signed agreements. Renegotiations account for 39% and 10% of leases are expansions.