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Report – the warehouse market in Poland 3Q 2015

Poland’s warehouse market is on a further development path – stable increase in demand and new supply

The figures for market demand and supply in the warehouse market show that 2015 could be another record year. Demand exceeded 540 000 m2, of which 50% was made up of new lease agreements and expansions. From July to September of this year, supply increased by 380 000 m2, of which the most was in the Wroclaw region and Upper Silesia. A further 600 000 m2 is under construction, including more than 150 000 m2 in the Warsaw region. Negotiations are underway involving several large projects that should close in the last quarter, which is usually the best period in terms of demand during the year.

DEMAND

Demand in Q3 reached 540 000 m2, most of which was in the Warsaw area (over 180 000m2) and Upper Silesia (100 000 m2). Compared to the same period last year, this result is 13% higher. Most new lease agreements and extensions were signed in the Warsaw area (98 000 m2). In the structure of demand, there were no significant changes; logistics companies still dominate (30%), followed by retail chains (20%) and light production (13%).

Among the largest new contracts, worthy of mention are the BTS Sonoco projects within Panattoni II (26 600 m2), BTS Bombardier in Wroclaw (19 400 m2), which is also being carried out by Panattoni, and the expansion of Euro-net at Prologis Park Janki by about nearly 15 000 m2.

“Since the beginning of the year, tenants have signed new leases for more than 1,074 million m2, which bodes well for growth in the storage sector in Poland. Dominant among the new lease agreements are contracts associated with the need to expand space or change to a more modern warehouse in order to optimize logistics processes and production,” said Renata Osiecka, Managing Partner at AXI Immo. “The structure of the new demand is also exhibiting an increasing share of medium-sized Polish companies, which as a result of new orders are deciding to move or expand their space,” added Renata Osiecka, Managing Partner at AXI Immo.

SUPPLY

In the 3rd quarter this year, developers put into service 390 000 m2 of modern warehouse, which is 20% less compared to the same period last year; however, it should be noted that in September 2014 more than half of the new supply was accounted for by two projects for Amazon. Currently, the distribution of new supply is more proportional. Most new warehouse space was completed in Wroclaw (109 000 m2) within four investments, and in Upper Silesia (61 000 m2) within 2 projects.  Nearly 80 000 m2 of this supply was in smaller markets, such as Rzeszów, Lublin and Szczecin.

Development activity remains high. There is currently over 600 000 m2 under construction, of which 42% is speculative investment or partly speculative. Most new projects are being carried out in the Warsaw area (155 000 m2) and in Upper Silesia (98 000 m2). It is worth mentioning the presence of developers in smaller markets, where they are carrying out partly speculative investments. New projects are opening in Szczecin, Bydgoszcz and Lublin.

“Developers, encouraged by the high level of activity among tenants and the low availability of space in selected regions, are being bolder in pursuing new investments. It is worth noting that the largest market players have returned to investments, including speculative, in Warsaw. Warehouse parks are under construction in new locations, such as Grodzisk Mazowiecki and Raszyn. Over 25% of space under construction near Warsaw is in speculative projects,” added Renata Osiecka, Managing Partner at AXI Immo.

The largest projects completed this quarter include: phase II of Panattoni Park Wroclaw III (50 700 m2), a BTS for GE in Bielsko-Biala (45 000 m2) and Goodman Wroclaw IV Logistics Centre (39 500 m2).

VACANCY RATE

At the end of the third quarter 2015, the vacancy rate was 5.3%. This is an increase of 0.3% compared to the second quarter this year. In all regions, the availability of space is below 10%. As in the second quarter, the highest level of free space is in Warsaw (9.8%) and its surroundings (8.5%), followed by Wroclaw (7.2%) as a result of putting into service nearly 30 000 m2 without secure lease contracts.

The biggest problems with the availability of space for immediate lease are in Poznan and Central Poland, where the vacancy rate is 3%. In the first quarter of next year the situation should improve in the Poznan region; in the case of Lodz low availability may stay at the same level over the next 6-7 months.

RENTS

Despite the low vacancy rate, there is a downward trend in effective rents for newly opened projects in Upper Silesia, the Poznan region and Warsaw.  In addition, there is an increasing divergence between offered and effective base rents. Stable rates persist in existing projects.

FORECAST

Currently, a large number of projects at an advanced stage of negotiation exist in the market, allowing an optimistic outlook for the coming months. The driving force behind demand will be expansions and relocations of tenants related to the need to extend warehouse and production space and new direct investment from domestic and foreign companies.

On the supply side, we will observe the development of new locations along successive main junctions and expressways, as is the case in Warsaw (Grodzisk Mazowiecki), Poznan (Wysogotowo) and Wroclaw (north-western part of the city).

More information about AXI IMMO at www.axiimmo.com/en

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