Polish warehouse market at full power

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An impressive 1.6 million sq.m of demand is the best quarterly result in the history of the Polish warehouse market. Developers are not slowing down either, with 2.3 million sq m of new space under construction.

The consultancy firm JLL has summarised the situation in the Polish warehouse and industrial space market at the end of Q1 2021.

Demand – a quarter of records

“A year has passed since the real estate market faced the effects of the COVID-19 pandemic. During this time, the warehouse sector in Poland has not only proven its resilience to sudden economic and social changes, but also maintained its extraordinary growth dynamics by breaking new records. The impressive 1.6 million sq m of gross take-up recorded between January and March is the best quarterly result in the history of this market,” informs Tomasz Mika, Head of Industrial and Industrial Leasing in Poland, JLL.

Net demand (new contracts and expansions) reached an impressive 1.1 million sq m. In this respect, it was the second best quarter in the market’s history. The dominance was maintained by logistics operators and courier companies (almost half of the net demand), the manufacturing sector (28%) and retail chains (24%) were also very active.

“The first quarter of 2021 belonged to the markets of the so-called Big Five, i.e. Poznań, Wrocław, Upper Silesia, Central Poland and Warsaw. Net demand in these markets amounted to as much as 900,000 sq m. It is worth noting that after a period of relatively low activity, Poznań has gained a dominant position. The net demand recorded in the first three months of the year there was higher than the best full-year result so far, observed in 2013, when Amazon entered the market,” calculates Maciej Kotowski, Senior Market Analyst, JLL.

The Polish warehouse market is characterised by interesting diversification both in terms of the scale of contracts and the properties sought.

“In Q1, both small contracts – less than 1,000 sq m – and large deals exceeding 100,000 sq m were concluded. Almost all formats attracted tenant interest, from big-box warehouses near major agglomerations and regional emerging markets to BTS developments and city warehouses,” adds Maciej Kotowski.

Developers’ market hot

In Q1, 745,000 sq m of new warehouse space was delivered, with total supply reaching 21.4 million sq m. The Big Five markets accounted for 80% of the existing stock. Upper Silesia, Warsaw and Tricity accounted for most of the new space (500,000sq.m). Nationwide, around 20% of completed space remained vacant.

“Unrelenting demand and positive sentiment are driving construction activity. The market is surging ahead with over 2.3 million sq m of warehouse space at various stages of construction. In Q1 alone, developers launched new projects totalling nearly 1.2 million sq m, 70% of which were already secured with leases,” reports Tomasz Mika.

Over 70% of the space is being developed in the Big Five markets, with Poznań being the leader (430,000 sq m).

Stable rents and falling vacancy rate

The activity of tenants and the low share of speculatively built space have translated into a further decline in the vacancy rate in Poland, which currently stands at 7.2%. Taking into account the situation on the developer market, the vacancy rate should remain stable or even fall slightly.

Invariably, urban locations remain the most expensive, with base rents in Warsaw ranging between EUR 4.3 and EUR 5.25/sq m/month. /month. The most attractive financial conditions are offered by big-box facilities located in Central Poland (2.6 and 3.5 EUR/sq.m/month).

The second best start of the year in the history of the investment market

“The pandemic has affected buyers’ priorities, directing their attention even more towards the warehouse property sector. As a result, warehouses have become the most desired investment product in Poland in 2020. In Q1 2021, investor activity continued at a high level. As a result, investment turnover amounted to €391 million, the second best ever result for Q1. The largest transaction concluded in January-March was the acquisition of a portfolio of logistics parks by Ares Group from Panattoni. In turn, the most significant single real estate transaction was the purchase of BTS Castorama in Stryków by Savills IM from Tritax,” informs Sławomir Jędrzejewski, Director in the Capital Markets Department at JLL.

At the end of Q1 yields for prime warehouse schemes (with multiple tenants on 5-year leases) were at around 5.25% (around Warsaw, Wrocław). In the case of typical urban projects developed in Warsaw, yields are estimated at 5%. Assets secured by longer contracts (10 years) are valued below 4.5%, and exceptional projects leased for more than 15 years are valued at even 4% with further compression perspective.

Source: JLL, Photo: Sławomir Jędrzejewski