Marketbeat: Poland warehouse market - Q1 2018 [REPORT]

Nearly two million sq m under construction in 56 projects

• An increase in demand driven by expansions and newcomers, including international manufacturing and e-commerce operators
• Effective rents up due to rising construction costs, healthy demand and limited warehouse space availability
• Positive market outlook amid strong economic fundamentals with Poland’s GDP forecast to increase by 4.1% in 2018
• The industrial market’s growth will depend on workforce availability and further road improvements. Poland is also seeing new logistics markets emerge, including Zielona Góra, Świecko, Olsztynek, Zgorzelec, Białystok and Kielce

At the end of Q1 2018, Poland’s total warehouse and industrial stock stood at 13.9 million sq m following the delivery of 388,000 sq m to the market in 12 projects. Central Poland led the league table for new supply with 213,000 sq m completed, including phase one of the Central European Logistics Hub in Łódź (79,000 sq m for BSH Sprzęt Gospodarstwa Domowego). Other leading markets in terms of new supply were Szczecin (52,000 sq m), Warsaw Suburbs (33,000 sq m), Western Poland (33,000 sq m) and Krakow (31,000 sq m).

At the end of the first quarter there was 1.91 million sq m of warehouse space under construction in 56 projects across Poland. This was the largest ever quarterly development pipeline of which nearly 75% was secured with pre-lets. The highest concentration of development activity was in Upper Silesia, Central Poland, Western Poland and Warsaw Suburbs, accounting for 64% of space under way - said report author Adrian Semaan, Research Consultant, Industrial & Logistics Agency, Cushman & Wakefield.

Leasing activity remained robust in the first quarter of 2018 with warehouse take-up reaching more than 1.18 million sq m, the best first-quarter performance on record. Occupier interest focused on Poland’s core warehouse markets, including Central Poland (20% of all deals), Warsaw Inner City and Suburbs (18%), Poznań (12%), Upper Silesia (11%) and Wrocław (9%). New lease agreements and expansions accounted for 80% of the leasing volume while renegotiations made up the remaining 20%. Demand for warehouse space came mostly from e-commerce (24%), logistics operators (23%) and retailers (19%). Other leading sectors included manufacturing (5%), pharmaceuticals (4%), the automotive sector (3%), household appliances (3%) and electronics (3%).

At the end of Q1 2018, Poland’s vacancy rate fell to 4.7%, the lowest since 2004. Logistics facilities in Szczecin, Western Poland and Bydgoszcz-Toruń were fully let. The lowest vacancy rate of 1.9% was recorded in Central Poland, while the highest were in Krakow (11.1%) and Warsaw Inner City (8.5%).

Effective rents edged up by an average of EUR 0.10/sq m/month in Q1 2018 as landlords enjoyed the upper hand in lease negotiations due to low vacancy rates in top prime locations and rising development costs.

The highest headline and effective rents, the latter being lower due to financial incentives, are in Warsaw Inner City standing at EUR 4.00–5.25/sq m/month and at EUR 3.50–4.80/sq m/month, respectively, and in Krakow – at EUR 3.50–4.50/sq m/month and EUR 2.60–4.00/sq m/month, respectively. On the other markets, headline rents are EUR 2.40–3.60/sq m/month while effective rents range between EUR 1.90–3.20/sq m/month.

OUTLOOK

Looking ahead into 2018, the Polish leasing market is expected to remain buoyant, fuelled by the expansion of e-commerce generating ever stronger demand for warehouse space and specialised logistics services. Logistics parks and BTS schemes located close to key transportation routes and hubs are expected to continue to dominate the development market. Development activity is also projected to pick up in the segment of smaller urban logistics facilities needed for last mile delivery. Such projects will enable faster and more efficient order fulfilment for a growing e-commerce customer base, and are likely to break ground in Warsaw, Wrocław, Łódź and Szczecin.