Years of preparation and planning by GLP’s Czech development team has been paying off in recent days with building hand overs and construction starts. Workers installed the first pillar of the company’s project in the Hrušov district of Ostrava on October 7 within a kilometer of the D1 motorway (and within two of the city center).
The 92,000 sqm project’s location is so close to town that future employees will be able to take existing bus lines to work. The pace of construction is mirroring that of leasing, with GLP willing to build a certain portion of the scheme on spec in addition to space it’s managed to pre-leased.
Last week, on the edge of Prague in Chrášťany, GLP handed over to Alza.cz the first 25,000 sqm portion of a 39,000 sqm facility due to complete in the spring. The developer has also leased the project’s smaller building (11,000 sqm) to Ecologistics, which moved in on August 8. GLP Park Praha Chrášťany is sandwiched between a Prologis and CTP site, but the stiff competition that’s true all-around Prague hasn’t prevented it from leasing up long before completion.
While this sort of progress on projects sounds pretty-much standard, there’s a palpable sense of excitement about them from GLP’s development team. “GLP wants to build a long-term, sustainable portfolio, located in the most active markets,” says head of GLP’s Prague office Jan Palek. “We might be looking at something in Hradec Králové or Liberec if we think it’s a good long-term market for us.
“So, if we realize it’s a market where we can hold the property for decades and it will bring us what we want, then we will enter such a market.” He says GLP trust its individual country managers to identify strong investment opportunities and backs them with the necessary resources.
While Palek’s team is authorized to move forward on projects, a rush of inflation has turned usual dynamics of the construction sector on its head. Usually, contractors offer lower prices each round as they compete for the job and the investor explains the specification. “Today, it’s the other way around. You have the first round and then the price goes up. At the end of the day, you sign with the one who can actually deliver and who actually gave you the smallest price increase. It’s crazy.” Complicating matters is the fact that builders are often only guaranteeing their price offers for a week, rather than the usual two to three months.
All of which means that even GLP is considering whether to hold off before beginning construction certain buildings, just to see what happens. In any case, trust is now more of an issue than ever before. “I often get the question about why we don’t try new companies. It’s because you don’t know if the new ones will deliver.” The usual standard delivery time for an uncomplicated shed of around 20,000 sqm used to be 6-7 months. Palek says this is now being stretched to 12 months because the old speed of delivery can no longer be guaranteed.
But once the supply chain situation eventually calms down, Palek hints that the end result will be even greater demand for warehouse space across Europe. “Already you can see that many companies from Asia have started looking for warehouses around Europe because they realized they need to bring the raw materials here and then carry on with distribution…They know if they want to be competitive, they need to get the materials they produce closer to their customer reliably.”
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