Marketbeat: Poland warehouse market - H1 2018 [REPORT]

In H1 2018, warehouse supply totalled 734,000 sq m delivered across 29 projects, bringing Poland’s total industrial stock to more than 14,300,000 sq m, which represented a 21% rise year-on-year. The biggest logistics markets are Warsaw and Warsaw Suburbs (a 27% share of Poland’s total stock), Upper Silesia (18%), Central Poland (14%), Poznań (13%) and Wrocław (11%). The largest volumes of new warehouse space came onto the markets of Central Poland (259,000 sq m), Upper Silesia (131,000 sq m) and Warsaw Suburbs (114,000 sq m).

At the end of June 2018, there was approximately 2,250,000 sq m of warehouse space under construction, reflecting a record-breaking development activity. Approximately 75% of the development pipeline has already been secured with pre-lets, largely at BTS schemes which account for 40% of warehouse space underway. Of all the regions, the largest volume of new supply is expected in Central Poland (628,000 sq m), followed by Upper Silesia (338,000 sq m), Wrocław (227,000 sq m) and Warsaw Suburbs (193,000 sq m). Robust developer activity is also being recorded on smaller regional markets such as Western Poland (183,000 sq m), which is seeing an increase in logistics developments in the vicinity of the S3 expressway.

Warehouse take-up hit a record high in H1 2018 with 2,100,000 sq m transacted, which represented a 18% increase on the same period last year. Net take-up remains strong with new leases and extensions accounting for 76% of the total leasing volume. The strongest leasing activity was recorded in Central Poland (a 19% share of the leasing volume), Warsaw and Warsaw Suburbs (19%), Upper Silesia (13%), followed by Poznań (11%) and Wrocław (11%). Warehouse take-up came mostly from logistics operators (31%), retailers (17%), e-commerce (15%) and light manufacturing (8%).

Our outlook for take-up volumes remains positive. Growing demand for warehouse space and specialist logistics services will be largely driven by the rapid growth in turnover recorded by e-commerce. This segment is expanding, which is evidenced by deals transacted by such retailers as Smyk at Central European Logistics Hub in Łódź (70,000 sq m, Panattoni) and H&M at SEGRO Logistics Park Poznań Gądki (30,000 sq m, SEGRO) - said report author Adrian Semaan, Consultant, Industrial and Logistics Agency, Cushman & Wakefield

The unwavering demand for warehouse space pushed Poland’s vacancy rate down to an all-time low of 4%, equating to 573,000 sq m of vacant space at the end of H1 2018, down by 0.7 p.p. and 1.4 p.p. compared to vacancy rates recorded three months and a year earlier, respectively. The highest vacancy rates were in Warsaw Inner City (10.4%) and Krakow (8.4%). Vacancy rates on other markets remained below 5.7%.

After several years of stable rents, 2018 is seeing a strong increase in rental rates due to rising development costs. Although base rents hold firm, effective rents which are lower due to lease incentives have risen in some locations by approximately 5% since year-end 2017. Poland continues to offer the lowest rents in Central and Eastern Europe. By comparison, prime Class A logistics rents in the Czech Republic and Hungary are 10% and 15% higher, respectively.

The Polish industrial market continues to be driven by strong take-up and a positive outlook for leasing volumes. Growing demand for warehouse space and specialist logistics services is being fuelled by Poland’s booming economy, rising household consumption and the rapid expansion of e-commerce. In addition, with further improvements to its transport infrastructure Poland is emerging as the core logistics hub in the CEE region as it benefits from its strategic, central location in Europe, enabling efficient cross-border distribution operations. Despite the current challenges of rising development costs and the tight labour market, particularly in Poland’s core warehouse locations, the outlook for the coming months remains positive, underpinned by healthy supply and strong investor interest in the Polish market. We expect supply and take-up to set new highs in 2018 - said Joanna Sinkiewicz, Partner, Head of the Industrial and Logistics Agency, Cushman & Wakefield Poland.