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Warehouse sector on a roll

Alex Hayes 12 February 2018

Alex Hayes


+48 22 356 25 20

Alexander Hayes is currently working as a journalist for Eurobuild Central & Eastern Europe magazine. Originally from the UK, he moved to Poland in 1995 and has been working in real estate for over four years. He has a BA in english literature from the University of Buckingham.

POLAND Gross demand for warehouse space came to 4 mln sqm, of which 75 pct was made up of new lease agreements and expansions, according to figures from Axi Immo.
This is a 32 pct improvement on 2016. Developers responded quickly to high demand from tenants, resulting in 2.36 mln sqm delivered to the market and 1.39 mln sqm being under construction at the end of 2017. The high level of absorption caused the vacancy rate to decrease to 4.5 pct.

In 2017, the total value of transactions in the industrial segment in Poland came to EUR 880 mln, which represents a 14 pct increase on 2016. The largest transaction was the sale of the Logicor portfolio, including 28 properties in Poland with an area of 900,000 sqm, to China Investment Corporation (CIC).

“The pan-European trend of yield compression also applies to Polish real estate, although logistics and industrial products in Poland are still less expensive than in Western European countries. Average capitalisation rates depending on the type of facility are between 6.5 pct and 7.5 pct, with the exception of individual BTS cemtres leased to international brands,” said Renata Osiecka, the managing partner at Axi Immo. “Warehouse products will remain of interest to investors, but the question is how will new tax regulations on the method of settling lease costs and the retail tax affect the logistics industry and the sector's assessment by investors,” she adds.

Last year, over 4 mln sqm was leased, of which 75 pct was made up of new lease agreements and expansions. For the third year in a row, demand broke new records. The result for 2017 is 32 pct higher compared to the previous year and as much as 61 pct higher than in 2015. Large transactions accounted for as much as 30 pct of new lease agreements over the year.

The Central Poland region saw the highest number of transactions with 960,000 sqm leased, representing a 243 pct rise on the previous year. The regions of Warsaw (950,000 sqm) and Upper Silesia (860,000 sqm) also saw impressive leasing levels.

Large lease agreements for BTS investments dominated with high demand from the e-commerce and retail sectors. Logistics operators had the largest market share (32 pct), followed by retail chains (15 pct), e-commerce (15 pct) and automotive (6.8 pct). However, the largest lease agreements were in the e-commerce sector, such as Amazon and Zalando.

In 2017, a total of 2.36 mln sqm was delivered to the market, which is 89 pct more than in the previous year. The largest amount of new space was completed in the Warsaw region (478,000 sqm), with Upper Silesia in second place (388,000 sqm) and Szczecin in third place where new supply exceeded 320,000 sqm.

The total supply of modern space in Poland at the end of 2017 came to 13.3 mln sqm. At the end of the year, 1.39 mln sqm was under construction of which 30 pct was made up of speculative investments. The largest BTS development is in Upper Silesia (360,000 sqm), followed by Central Poland (301,000 sqm) and Warsaw (243,000 sqm). The highest number of speculative projects are also under construction in Upper Silesia. Among developers, the largest share of the new supply was built by Panattoni Europe (53 pct), followed by Goodman (14 pct), P3 (8 pct), MLP and Hillwood (5-6 pct).

At the end of 2017, the vacancy rate came to 4.5 pct, a drop of 1.7 percentage points y-o-y. At the end of the year, there was virtually no space available in Central Poland, Szczecin, Tricity and Bydgoszcz. The highest vacancy rates were near Kraków (13.8 pct) and Poznań (8.0 pct). The largest drop in free space was recorded in the Tricity, where the vacancy rate fell from 13.9 pct to 1.3 pct at the end of 2017. This year, the vacancy rate will remain at a low level in most locations, while periodic increases should not exceed 2-3 pct nationally.

Rent rates rose in the second half of the year. The most attractive effective rates were near Warsaw and Poznań (1.9-2.4 EUR per sqm). An average increase of EUR 0.2 was recorded in Upper Silesia and Wrocław. Rates in Łódź remained stable at EUR 3.0 per sqm. In new locations such as Szczecin, Zielona Góra and Kielce, effective rates remain within the mid-market range, (EUR 2.3-2.6 per sqm).

2018 may be as successful as 2017. The GDP forecast for Poland is above 4.0 pct and for the entire EU 2.5 pct, which is a good sign for the warehouse sector. The PMI index is also growing, which means an increase in production and investment outlays by companies present in Poland.

The main threat to further growth of the warehouse and production sector in Poland is the low availability of labour.

Indirectly, staff shortages in the construction industry may also affect the warehouse market. General contractors could extend delivery dates. And the average duration of a project may be prolonged by 2-3 months.

Rental rates will rise due to the increase in the cost of purchasing land for investment and other investment-related costs.

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