Poland’s Automotive Sector

The existence of a modern automotive sector is one of the key features of all developed economies. Direct investments in car manufacturing

plants are much sought after by governments, who often go to great lengths to secure these projects. Car plants not only provide jobs, but also

stimulate local economies, increase exports and foster general economic growth. Set out below are just a few examples of the automotive

industry’s contribution to Poland’s economy:

Poland was still the main car producer in CEE in 2004, but over the

course of a decade it was overtaken by both the Czech Republic

and Slovakia, which managed to attract a number of large foreign

automotive investments. In 2013, more than 583 thousand

automobiles rolled off production lines in Poland, which made the

country the EU’s eighth largest car manufacturer.

Car production in Poland is concentrated in major industrial hubs

such as Upper Silesia (Fiat, Opel), Poznań (VW) and Wrocław

(Volvo). However, the country’s automotive output is much more

than just car manufacturing. In fact, the vast majority of production in

Poland involves parts and components for export. Multiple

producers, subcontractors and suppliers operate throughout Poland,

making the automotive supply chain a compound system.

Poland’s automotive output is set to increase substantially in the

next few years with a number of large capacity-enhancing

investments announced recently. Those most notable include:

The New Volkswagen Crafter plant in Września with an ultimate

capacity of 100,000 vehicles annually to be reached in 2016.

Production of the fifth-generation Astra to be started in GM’s

Gliwice plant in 2015.

A new diesel engine production line in GM’s Tychy plant.

Car production in the CEE region

Source: OICA 2013

Poland’s Automotive Sector:

Momentum Ahead

9.5%

of sold industrial production in 2013. Second only to the manufacture of food products.

Third largest industrial employer

158,000 employed in 2013.

11.7%

of Polish exports in 2013.

0

250 000

500 000

750 000

1 000 000

1 250 000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Czech Republic Hungary PolandRomania Slovakia

Source: Central Statistical Office

Source: Central Statistical Office

Source: automotivesuppliers.pl

Main Manufacturing Companies - Automotive Sector

Mazowieckie Region

Delphi Poland

Faurecia

TRW Sterling System PolandKongsberg Automotive

Błonie

Grójec

Pruszków

Małopolskie Region

MAN TrucksMeiller PolskaNidec Motor & Actuators Poland

Niepołomice

Świętokrzyskie Region

PilkingtonAutomotive Poland

AutoboxMan BusP.P.H.U. Goset DuoZ.P.H. Prodhurt Bis

Sandomierz

Starachowice

Lubelskie Region

D&D Resory PolskaDZT TymińscyPOL-MOT Warfama

Lublin

Łódzkie Region

BZWF MotorOrsa Moto

Ozorków

Wielkopolskie Region

Delphi Poland

Bridgestone PoznańExide TechnologiesSolaris Bus & Coach

Volkswagen Poznań

Ostrów Wielkopolski

Poznań

Dolnośląskie Region

Autoliv PolandEPPFaurecia WałbrzychSimoldes Plasticos PolskaToyota Motor Industrial Poland

Faurecia LegnicaGates Polska TBMeca PolandWezi-tec

Cropu PolskaRosa Europe

Volvo PolskaWABCO Polska

Sanden Manufacturing PolandSitech Volkswagen Motor Polska

Fiuka PolskaHMT Heldener Metalltechnik PolskaPGWSchürholz PolskaVIA Technika Obróbki Powierzchniowej

AGC SilesiaFaurecia Wałbrzych NSK Steering Systems Europe (Polska)Toyota Europe Engineering & Maintenance Toyota Motor Manufacturing PolandToyota Susho EuropeTristone Flowtech PolandQuin PolskaRonal Mando

Jelcz Laskowice

Legnica

Wrocław

Polkowice

Środa Śląska

Wałbrzych

Śląskie Region

Cooper Standard Automotive PolskaCornaglia PolandEaton Automotive SystemsElectropoli GalwanotechnikaFiat Powertrain PolskaFiat Powertrain Technologies PolskaHutchninson PolandMagneti Marelli Suspension Systems BielskoPojazdy Specjalistyczne Zbigniew SzczęśniakTI Poland

TRW Steering Systems PolandValeo Electric and Electronic SystemsZakład Usług Technicznych ZUT

GST AutomotiveSafety PolandTRW Polska

Brembo

Assembly Centre GliwiceAutorobot StrefaEpedal PolskaGeneral Motors Manufacturing PolandHirschvogel Components PolandHP PolskaKirchhoff PolskaNexteer Automotive SystemsNGK Ceramics PolskaPlastic Omnium Shinchang PolandSILS Centre GliwiceTenneco Automotive Eastern EuropeTRW Breaking Systems PolskaYushin Precision Automotive

Delphi Poland

Automotive Lighting PolskaMagneti Marelli Exhaust Systems PolskaNadwozia-Partner Plastic Components Fuel System PolandPlastic Components and Modules PolandSegu Polska

Boryszew S.A Oddział MaslowBOS Automotive Products PolskaComau PolandFiat Auto PolandFord Werke GmbHHuf PolskaGeneral Motors Manufacturing PolandLear Corporation Poland IIMagna Car Top Systems PolandMagna FormpolNexteer Automotive PolandVAB Czesław Tomkowicz

MCSNifco Korea Poland

Bielsko Biała

Czechowice – Dziedzice

Częstochowa

Dąbrowa Górnicza

Gliwice

Jeleśnia

Sosnowiec

Tychy

Żory

Lubuskie Region

Faurecia GorzówGorzów Wielkopolski

Zachodniopomorskie Region

Bridgestone StargardMTU Polska

Stargard Szczeciński

Warmińsko - Mazurskie Region

MichelinOlsztyn

Pomorskie Region

Bibus MenosDelphi Poland

LauberKapena Nordglass II

Eatong Automotive ComponentsEaton Truck Components

Gdańsk

Słupsk

Tczew

Podkarpackie Region

Dębica

Firma TarapatyGregson PolskaKamot – Mielec Zakład ProdukcyjnyKirchhoff PolskaKirkham MotorsportsLear Corporation PolandLeopard AutomobileRegmotStamet – Zakład MechanicznyS. StachuraWaldrexWAW Mielec

ATS Stahlschmidt & MaiwormUniwheels Production (Poland)

Dębica

Mielec

Sanok

MAN Bus

Scania

Solec Kujawski

Solbus

Stalowa Wola

Autosan

Kujawsko - Pomorskie Region

Solec KujawskiBłonie

Pruszków

Grójec

Lublin

Stalowa Wola

Mielec

Dębica

Starachowice

Sandomierz

Sanok

Ozorków

Niepołomice

Czechowice Dziedzice

Bielsko Biała

ŻoryTychy

Sosnowiec

Dąbrowa Górnicza

Gliwice

Częstochowa

Jelcz-- Laskowice

WrocławWałbrzych

Środa ŚląskaLegnica

Nowa Sól

Poznań

Ostrów - - Wlkp.

Stargard -- Szczeciński

SłupskGdańsk

TczewOlsztyn

Polkowice

Jeleśnia

Sor Iberica Polska

Fabryka Tapicerki Samochodowej FatsaGedia PolandJost PolskaUtescheny Polska

BCC Polska Nowa Sól Gorzów Wlkp

Września

Volkswagen WrześniaWrześnia

Industrial Real Estate

As Poland’s automotive output is likely to find itself on a rising curve,

the industrial real estate market will be affected. New production

plants and extensions to existing ones will require a new network of

suppliers, who will be seeking industrial facilities across various

locations. Some will certainly prefer operating in owner-occupier

buildings, others will have a preference for renting industrial

properties.

As with most manufacturers (excluding light production), automotive

companies require facilities which are tailored to their specific needs,

and with each improvement the construction cost increases. Buying

such a facility often requires the freezing of a substantial amount of

working capital. Therefore leasing often becomes an option worth

considering.

During the past ten years, numerous automotive companies have

decided to relocate their operations to commercial buildings. This

phenomenon has been gathering pace, particularly during the last

three years. Leasing industrial space, as opposed to owning it, is not

only more cost efficient, but is also valued for flexibility, as most

suppliers collaborate with a manufacturer on the basis of temporary

contracts.

Demand for industrial space from the automotive sector

Source: JLL, warehousefinder.pl, Q1 2014

In addition to the above-mentioned arguments, we set out below a

calculation that aims to determine which approach to real estate

(renting or owning) is more financially beneficial in a given market

environment.

Source: JLL, June 2014

As shown in the above table, the lease of a 10,000 m2 production

unit over the course of ten years turns out more cost-effective than

owning that unit. However, each particular business case should be

subject to separate analysis which takes into account all specific

market impact factors.

Economy of a Production Project

Warehouse size [m2] 10 000 Annual indexation 2%

Size of office component [m2] 500 Residual value [EUR/m

2] 400,00

Warehouse rent [EUR/m2/month] 4 Cap rate 7,50%

Office rent [EUR/m2/month] 9,5 Discount rate 8,00%

Service chargea [EUR/m2/month] 1

Ownership

Year 0 (Asset Purchase) Year 1 Year 10 Year 11 (Asset Disposition)

Operating costs (126 000) (150 582)

Capex (25 000) (29 877)

Purchase Costs (7 160 000)

Sale Proceeds 4 200 000

Net Annual Income (7 160 000) (151 000) (180 459) 4 200 000

NPV of cost position (Ownership) (5 976 271)

Lease

Year 0 (Asset Purchase) Year 1 Year 10

Rental Obligation (537 000) (641 765)

Service charge fee (126 000) (150 582)

Total (663 000) (792 346)

NPV of cost position (Lease) (4 810 835)

Renting Owning

Higher flexibility to relocate

after a lease expires.

Negotiable rent.

Lower overhead costs.

Focus on core business.

Security in case of short term

contracts.

In the case of locations in a

larger park, additional costs

are shared by all tenants.

Flexibility in making

improvements.

Better control of the facility

and its surroundings.

Tax optimization / property

amortization.

Security in case of long-term

contracts.

Reduction of relocation

costs.

Modern automotive production facilities feature:

Large differences in technical specification due to the various

production profiles (glass, batteries, brakes, car seats, etc).

Numerous above standard improvements.

Increased floor-load capacity because of heavy machinery use.

Usually an out-of-park location due to onerous production.

Location in proximity to skilled labour force.

Often railway sidings.

Proximity to steelworks and other resources.

Proximity to clients and subcontractors.

0

5

10

15

0

50 000

100 000

150 000

200 000

2005 2006 2007 2008 2009 2010 2011 2012 2013

m2

Net-take up Number of leasing transactions

Leasing industrial space

The modern real estate market in Poland provides a number of

options for production companies seeking to optimize their real

estate portfolios by leasing industrial space. They can choose from

the following solutions:

A built-to-suit facility on a greenfield site: the process is led by the

developer, who purchases a site and finances construction. The

project is designed according to the tenant’s specification. Lease

agreements tend to last for seven to ten years.

Built-to-suit in a warehouse park: the process is similar to the

above; however, it’s timeline is shorter, as the site is usually

already owned by the developer, who can thus commence

construction immediately. In this case the location is determined

by the developer’s portfolio.

Leasing of an existing building: typical lease term from three to

five years. The buildings feature a standard A-class technical

specification, with limited improvement possibilities. This option is

suitable for small production companies who need space

immediately.

The optimal time to start the search for a suitable production facility

is approximately one year before the start or renewal of a lease. The

desire to renew a lease should be communicated to the landlord six

months prior to the end of a lease, so the remaining six months

should be spent on checking offers. This time should be sufficient for

a tenant so it is not dependent on existing options only. A standard

production building can be put in place within six to nine months,

therefore, the earlier one starts looking, the more flexible one can be

during negotiations. A similar strategy is advised in the case of

companies who are yet to start their operations in Poland. Those

companies should also start monitoring the market in advance, in

order to acquire knowledge about existing available units and

potential speculative projects, which could be delivered by a certain

point in time.

Industrial land

Rents in production facilities depend on the one hand largely on the

number and scope of the improvements to the structure of a

building, and the price of the land on the other hand.

Currently, the industrial land market remains favourable for buyers,

as the demand for investment sites in most regions remains limited.

This is mostly due to the large land portfolios created by

development firms, who are now reluctant to make new purchases.

Apart from urban land, which is typically the most expensive, the

prices for investment plots are the highest in Kraków and followed by

Wrocław and Poznań regions.

Region Price (PLN/ m2)

Warsaw Inner City 200 - 550

Warsaw Suburbs 50 - 200

Central Poland 65 - 140

Poznań 140 - 200

Wrocław 120 - 240

Upper Silesia 90 - 200

Kraków 80 - 300

Tri-City 100 - 170

Source: JLL, warehousefinder.pl, Q1 2014

Jones Lang LaSalle

Tomasz Olszewski

Head of Industrial CEE

ul. Królewska 16

00-103 Warszawa

Tel. +48 22 318 0000

Fax +48 22 318 0000

tomasz.olszewski@eu.jll.com

magazyny.pl

www.jll.pl

Jones Lang LaSalle

Jan Jakub Zombirt

Senior Research Analyst

Research & Consultancy

ul. Królewska 16

00-103 Warszawa

Tel. +48 22 318 0105

Fax +48 22 318 0099

jan.zombirt@eu.jll.com

www.jll.pl

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