Warehouses in demand

At the end of June 2017, Poland’s total warehouse stock stood at nearly 11.8 mln sqm. Most of the 707,000 sqm supply was delivered in Bydgoszcz-Toruń (113,000 sqm), Poznań (112,000 sqm) and Central Poland (91,000 sqm). There is currently 1,665,000 sqm under construction, of which 77 pct. is secured with pre-leases. Nearly half of that volume or around 800,000 sqm will be delivered in BTS (Build-to-Suit) projects. The highest concentration of development activity is in Warsaw’s suburbs (with around 375,000 sqm), Szczecin (293,000 sqm) and Upper Silesia (282,000 sqm). Despite the high levels of supply, the vacancy rate stood at 5.4 pct at the end of June 2017, or around 634,000 sqm of vacant warehouse space. Vacancy rates edged up in Poznań (8.3 pct) and Wrocław (7.3 pct), and decreased again in Warsaw’s inner city (6.9 pct) and its suburbs (5.7 pct). Robust developer activity pushed vacancies up in Krakow (12.7 pct or 38,000 sqm), Szczecin (8.8 pct or 19,000 sqm) and Lublin (13.9 pct or 18,000 sqm). The lowest warehouse vacancy rate of 0.3 pct was in Central Poland. “Several factors have contributed to the outstanding performance of the Polish logistics market, including Poland’s strong economic growth, rising retail sales, a competitive labour market, the expansion of the country’s road network and the wide availability of development sites. New infrastructure improvements are paving the way for the warehouse market to expand beyond the core conurbations, best illustrated by the growing developer activity in Szczecin, Bydgoszcz-Toruń, western Poland, Lublin and Rzeszów. In addition, new warehouse locations have recently appeared on Poland’s industrial map along expressways: S3 (Zielona Góra), S8 (Białystok) and S7 (Kielce),” said Adrian Semaan, a consultant in the industrial and logistics agency at Cushman & Wakefield and the author of the report. In H1 2017, warehouse take-up rose to a record 1,786,000 sqm. The largest leasing volumes were recorded in Central Poland (423,000 sqm), Upper Silesia (414,000 sqm) and in the Warsaw region (367,000 sqm, of which 333,000 sqm was transacted in Warsaw’s suburbs). New lease agreements accounted for 67 pct of the total leasing volume with lease renewals and expansions making up 24 pct and 9 pct, respectively. Take-up was largely driven by logistics operators (32 pct), retailers (20 pct), light manufacturing (10 pct), e-commerce (9 pct), the automotive sector (7 pct) and household appliances (6 pct). “The record performance of the Polish warehouse market is underpinned, among other things, by the growing demand reported by e-commerce. Poland is extremely attractive to this sector due to its geographic location, strong labour market, large consumer market with growing retail sales, and low leasing costs,” said Joanna Sinkiewicz, a partner and the head of industrial and logistics agency at Cushman & Wakefield. Headline rents remained flat on the Polish industrial market. At the end of June 2017, the highest were in Warsaw’s inner city (EUR 4.00–5.25 per sqm per month) and Kraków (EUR 3.50–4.50 per sqm per month) while the lowest were in Central Poland (EUR 2.40–3.60 per sqm per month) and Warsaw’s suburbs (EUR 2.50–3.60 per sqm per month). Effective rents tend to be lower due to financial incentives conceded to tenants and range between EUR 1.90–3.20 per sqm per month. Effective rents are highest in Warsaw’s inner city (EUR 3.50–4.60 per sqm per month) and Kraków (around EUR 2.80–3.60 per sqm per month). “In H1 2017, rents remained low, indicating a balanced market where developers are able to accommodate the growing demand for logistics space. Intense competition has given more bargaining power to tenants, particularly those leasing areas of over 5,000 sqm, which accounts for 80 pct of the total take-up recorded in the first six months. The risks to the occupier market include rising development costs due to rising prices of building materials and services, which are likely to push rents up,” said Joanna Sinkiewicz. The Polish industrial market is the fastest growing commercial real estate sector in Poland. Tenant demand is expected to remain robust, underpinned by optimistic growth forecasts for the country’s GDP, consumption and retail sales in 2017, further improvements in the road infrastructure and the increasing impact of e-commerce. With the development pipeline standing at 1.67 mln sqm, this year’s total supply is likely to surpass the 1.2 mln sqm mark recorded in 2016. Cushman & Wakefield does not expect any substantial changes in vacancy rates or rental costs.