Marketbeat: Record levels of leasing and development activity - summary of Q4 2021 on the Polish industrial market

Total take-up up by 50% on 2020

Total warehouse take-up reached 7.5 million sq m transacted in 2021, which represented a 50% surge in demand year-on-year. Net take-up, comprising new leases and extensions, hit 5.8 million sq m, up by 68% compared to 2020.

“Robust occupier demand for warehouse space is being driven by the need to diversify logistics chains to meet the requirements of e-commerce and by congested global supply chains as many companies decide to increase inventory levels. We are seeing strong occupier activity from such sectors as retail, e-commerce, logistics and courier services, manufacturing and automotive industry, reporting demand for various sizes and types of warehouses, including big-box distribution centres and BTS (build-to-suit) projects, as well as urban warehouses, courier hubs and returns centres,” says Damian Kołata, Partner, Head of Industrial & Logistics Agency Poland, Head of E-Commerce CEE, Cushman & Wakefield.

Significant growth in large deals

2021 witnessed a notable growth in large leases, 38 of which were for more than 30,000 sq m. The largest deals included Zalando signing for a new 140,000 sq m warehouse at Panattoni BTS Bydgoszcz, confidential e-commerce tenants taking 104,380 sq m at Hillwood Bydgoszcz and 82,200 sq m at Panattoni BTS Gorzyczki. Other significant warehouse transactions saw TEDi secure 87,000 sq m at Panattoni BTS Stargard, Westwing Logistics lease 82,500 sq m at P3 Poznań II, ID Logistics take 78,159 sq m at Hillwood Rokitno, LPP sign for 69,000 sq m at Panattoni Park Rzeszów-North, and Fiege take occupancy of 62,500 sq m at 7R Park Goleniów II.

Warehouse vacancy rate falls to its all-time low

868,000 sq m of modern warehouse space was delivered in Q4 2021 across 37 projects, bringing last year’s total supply to 3.1 million sq m, up by 56% year-on-year, a record result in development activity. Despite the record level of new completions, the overall vacancy rate continued its downward trend and edged down by 2 pp over the quarter and by 3 pp year-on-year, falling to 3.8% at the end of 2021, its lowest since records began. Net absorption amounted to 1.11 million sq m, surpassing new warehouse supply for another consecutive quarter.

Nearly all regional markets reported lower vacancy rates, with the largest downward movements in Świętokrzyskie (down by 17.5 pp to 3.1%), Łódzkie (-5.5 pp, 2.9%), Greater Poland (-5.1 pp, 0.8%), Opolskie (-4.5 pp, 3.2%), Lower Silesia (-4.4 pp, 2.8%), Kuyavia-Pomerania (-4.4 pp, 4.3%) and Pomerania (-4.1 pp, 2.5%).

4.5 million sq m of warehouse space under construction at year-end 2021

In Q4 2021, in response to soaring demand and shrinking availability, developers commenced projects with a combined area of more than 1.6 million sq m. At the end of December 2021, the warehouse development pipeline stood at a record high of 4.5 million sq m. Of that total, 1.9 million sq m was not secured under pre-lets, the largest volume of speculative construction ever.

Forecasts expect Poland’s industrial stock to expand by 20% in 2022 and to surpass the 30 million sq m mark in the early months of 2023.

Rental growth to strengthen

The rapidly shrinking availability coupled with soaring construction costs which rose by around 20% year-on-year is likely to push warehouse rental rates up, say developers. Headline rents are expected to edge up steadily, with developers becoming less willing to grant financial incentives. Headline rents currently stand at EUR 2.80–3.90/sq m/month for big-box warehouses and at EUR 4.30–5.50/sq m/month for SBUs. Effective rents continue to range between EUR 2.00–3.10/sq m/month, depending on project location.

“Financial incentives from developers usually amount to 10-25% of the base rental rate and vary depending on lease conditions. The Polish industrial market looks set to remain highly competitive as rental growth is expected on most European markets,” says Adrian Semaan, Senior Research Consultant, Cushman & Wakefield.