Built-to-suit warehouses

Built-to-suit warehouses
With each quarter custom-designed warehouses are becoming more and more popular. A made-to-measure facility that meets the enterprise’s needs is an increasingly important component of building the company’s competitive advantage.

Over the past decade, the warehouse market has been changing dynamically. The economic crisis that broke out in 2008 made developers highly cautious about constructing new warehouses without pre-lease agreements, at least for a part of the planned space. As a result, facilities constructed in the BTS (built-to-suit) model, commissioned by individual customers, started conquering the market. Those were often, however, standard warehouses, with no special additional solutions or conveniences, and they were unique only in the sense that their construction started after signing the pre-lease agreement with one or several tenants. As the situation on the market gradually improved in the following years, developers adopted a bolder approach to constructing speculative warehouses. This trend has prevailed. Only in 2018, the warehouse market grew by 2.2 million sq. m. Total demand last year amounted to 4.2 million sq. m. New agreements accounted for as much as 76% of all transactions, 17% of which involved BTS facilities.
The attitude towards made-to-measure warehouses has also changed over the years. The facilities developed today are completely different from the ones constructed ten years ago. Those are typically specialised buildings tailored to the needs of their tenants, both in terms of size, location, technical solutions, as well as all other conveniences the client expects. Nowadays, commissioning of a tailor-made warehouse is a symbol, to some extent at least, of the company’s status. Enterprises with considerable financial resources do not hesitate to invest in dedicated warehouse buildings. The BTS facilities market is currently driven by the increasing technical and business requirements of the tenants, rather than being set back by the fear of the project’s failure (as was the case ten years ago).

7R Park Kraków

BTS for everyone

BTS is a good option for customers who need a warehouse in an unusual location (outside of areas considered popular for logistics) as well as for those who need a non-standard facility. Currently, custom-designed facilities are typically commissioned by manufacturing companies, retail chains and the e-commerce industry. Unlike typical warehouses, a dedicated facility allows to make full and optimal use of the available space and align it with the company’s operations.
From the developer’s point of view, BTS facilities become profitable starting from 10 000 sq. m. There does not seem to be an upper size limit, and we have recently seen that businesses, especially retail chains and the e-commerce industry, more often decide to construct facilities of over 100 000 sq. m. Such warehouses usually serve as their main distribution centres.
Another factor that is important from the investor’s point of view is signing a long-term contract. The minimum lease period for a tailor-made facility is 7–10 years on average, although longer contracts, where the term is 25 years, are also encountered.

Warehouses for e-commerce

BTS warehouses are a solution primarily for companies with stable operations and a long-term business outlook. Small and medium enterprises from the e-commerce sector are less inclined to make commitments that involve multi-year lease agreements. They need more flexibility to be able to opt for a smaller or larger area if their situation changes. That is why they more often choose speculative facilities. Their investment perspective is shorter when they occupy multi-tenant facilities. The warehouse space in such buildings is typically a rather standard, but it can be adapted to their needs to some extent. 7R builds speculative warehouses, which are constructed in accordance with the needs of tenants from the e-commerce industry, among others in terms of floor loading capacity, building’s height or the possibility of constructing a mezzanine.

The e-commerce industry is one of the most demanding sectors. For this group of tenants, the facilities adapted for quick distribution are equipped with sorters, more docking gates compared to the market standard and mezzanine floors that increase storage space for goods and accelerate the process of completing part-pallet orders. Construction of a mezzanine also involves meeting additional safety requirements: warehouses are fitted with sprinkler systems that guarantee fire protection and audible warning system to ensure effective communication in case of emergency. The mezzanine must be properly attached to the ground, which requires additional reinforcement of the floor. Appropriate emergency escape routes must be also ensured.

An example of such a project is the 41 000 sq. m warehouse for Answear.com (a leading on-line store from the fashion industry) constructed at 7R Park Kraków. The warehouse has been fully adapted to the customer’s needs. A part of the building is taller, which allowed to construct a multi-level racking system in the form of a mezzanine. It increases storage space and allows to pick goods from various assortment groups. The equipment also includes a system of conveyors and sorters that significantly streamline work. Modern infrastructure and the implemented solutions allow customers to build their advantage in the competitive e-commerce industry.
The e-commerce industry is unanimously identified by market experts as the one where high demand for large BTS facilities will prevail. So far, the e-commerce sector was so unstable that tenants found it difficult to estimate the scale of growth to come, uncertain how much storage space they will need. Currently, more and more clients from the e-commerce sector choose dedicated facilities and opt out of contracted logistics services in favour of own operations. This means that in the near future the structure of lease agreements may change: clients from the e-commerce sector will sign contracts directly with developers and will commission logistics operations in their facilities to specialised companies.

Nowadays, commissioning of a tailor-made warehouse is a symbol, to some extent at least, of the company’s status. Enterprises with considerable financial resources do not hesitate to invest in dedicated warehouse buildings.

Common denominator

Another industry where dedicated warehouse space is highly desirable is the broadly defined manufacturing. The detailed requirements for the layouts and solutions implemented at the facility will differ depending on what the company produces. However, some features can be considered common to almost all production facilities, including access to the daylight, more effective heating systems and better thermal insulation of the building. Manufacturing companies are also paying closer attention to availability of workforce in the given region. This factor is often of key significance when construction of a dedicated facility is planned.
An example of such a project is the BTS facility developed by 7R over two years ago for the tea manufacturer Teekanne. The facility built at 7R Park Kraków is the company’s largest manufacturing plant in Poland. Apart from the production space, the building also offers warehouse and office space as well as welfare facilities for employees. The 6 000 sq. m building was developed in keeping with the standards shared by all of the company’s production plants throughout Europe. The Teekanne factory supports a number of logistics processes associated with the manufacturing of tea, ranging from production, through mixing and flavouring, to sorting and packing tea into tea bags. An innovative highlight of the Polish factory are new generation machines, which could not have been installed in the previous location, and which are much more efficient than the previous machinery. They support production of packaging in a new size without the use of foil. Bigger packaging from the Perfecta line increases the product’s visibility on the store shelf and improves the comfort of use. The Perfecta machine produces up to 350 double chamber tea bags per minute. There is also a Constanta machine installed at the factory, which operates similarly and produces up to 140 bags per minute. The maximum output of the Teekanne factory near Kraków is 1.3 billion tea bags a year.
The demand for BTS facilities is growing. Clients see how important the product and its price are on the competitive and dynamic market. To be able to compete, you often need to lower the price, and to do so, you need to optimize many other aspects, such as transport and storage costs. This can be achieved by changing location and moving to a dedicated warehouse, especially when thinking long-term. All these factors combined make BTS facilities continue to enjoy their popularity for a long time.

AUTHOR: Marta Białowąs

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