Polish warehouse market once again on the European podium
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In 2020, demand for warehouses reached a record 4.8 million sq m, space stock expanded by more than 2 million sq m. As at the end of 2019, 1.9 million sq m of space remained under construction. Consultancy firm JLL has summarised the situation in the market for warehouse and industrial space in Poland at the end of 2020.
Demand – new contracts and expansions lead the way
Despite the exceptional economic situation, the Polish warehouse market recorded a record result last year, which once again confirms its strength. Take-up of 1.36 million sq.m in the fourth quarter pushed the year-to-date total to 4.8 million sq.m of leased space. Take-up increased to 4.8 million sq.m. New deals and expansions accounted for over 71% of this take-up. This allowed Poland to maintain its third place among the most active markets in Europe, comments Tomasz Mika, Head of Industrial Department at JLL in Poland.
A significant part of the new demand last year concerned the two largest markets – Warsaw (both zones) and Upper Silesia, which, almost equally, accounted for a total of 1.43 million sq m. (42% of net take-up). Each of the other three markets in the so-called ‘big five’ – Central Poland, Poznań and Wrocław – exceeded the 300,000 sq m mark. In total, the five largest markets accounted for around 71% of the newly leased space in the country. It is also worth noting the high results in Tricity and Lubuskie – demand in each of these markets reached over 200,000 sq m. While the result in Lubuskie was influenced by one exceptionally large transaction, Tricity observed many transactions of different sizes, which concerned several logistic parks.
It is also worth noting the growing popularity of the so-called city logistics, which was further strengthened by the dynamic growth of e-commerce sales. As defined by JLL, total new demand for urban logistics space in Poland’s eight largest agglomerations reached 450,000 sq m in 2020, including almost 80,000 sq m in Warsaw alone. In total, this represented more than 40% growth compared to 2019, explains Maciej Kotowski, Market Analyst, JLL.
The sectoral structure of new demand remains unchanged. The market was dominated by retail chains (39%), logistics operators (32%) manufacturers (24%). At the same time, exceptional activity from the food and FMCG sectors should be highlighted. These companies, operating within all three main sectors, leased a total of around 775,000 sq m last year.
Supply – developers’ activity is not weakening
The total stock of modern warehouse space in Poland reached 20.7 million sq m at the end of December. Despite a relatively low result in the fourth quarter, when only 285,000 sq m was delivered, the final figure remained at over 2 million sq m of space delivered in the whole of 2020, adds Maciej Kotowski.
Most of the new supply came from Warsaw, Upper Silesia and Wrocław, where a total of 1.4 million sq m was delivered. Moreover, exceptionally high results were observed in Tricity, where 140,000 sq m of new space was delivered, and in Poznań, which was the fifth market where the scale of new space exceeded 100,000 sq m.
This slightly lower performance on the supply side in 2020 should not be seen as any sign of a slowdown. The volume of space under construction remains at a very satisfactory level, with another 1.9 million sq m under construction at the end of the year, which is similar to the end of 2019, explains Tomasz Mika.
Unrelenting activity is still observed in Upper Silesia, where around 390,000 sq m was under construction in December. Again, attention should also be paid to the Tricity region, where the sum of active construction projects is as much as 270,000 sq m. Moreover, 200,000 sq m will strengthen the market resources in Lubuskie (one significant BTS investment).
The recently observed reduced share of speculatively built space was also visible at the end of 2020. Around 31% of the space under construction in December was not secured by lease agreements. Over 50,000 sq m was speculatively built in each of the markets of Warsaw, Tricity, Wrocław and Upper Silesia.
Investment market – best year ever
The COVID-19 pandemic has significantly changed the priorities of buyers, as evidenced primarily by the structure of investor interest in particular segments of the real estate market.
Warehouse transactions finalised last year reached a record value of EUR 2.7 billion, accounting for almost half of the total investment volume in the Polish real estate market. The amount of investments in the logistics sector was as much as 81% higher compared to 2019 and 48% higher than the previous record in 2018. As a result, warehouses have become the most desirable investment product in Poland for the first time ever, comments Tomasz Puch, Head of Capital Markets, JLL.
The warehouse sector was the only one to see the first signs of a return to yield compression in 2020. Exceptionally high demand, relatively low financing costs and limited availability of prime product on the market suggest that downward pressure on rates should be evident throughout 2021. For prime standard logistics properties, year-end rates stood at 5.75%. Warehouses leased for much longer periods than standard (over 10 years) and designed and constructed for a specific tenant (BTS) could achieve yields even below 4.5%. In turn, the best urban projects in Warsaw were priced at around 5.5%.
Rents remained at the current level. Warsaw and other urban locations remained the most expensive markets. A slight increase in rates was observed in some smaller markets such as Lublin and Podkarpacie. In Warsaw base rents fluctuated between 4.3 and 5.25 EUR/sq.m/month. The most attractive rates were offered in non-urban areas of Central Poland (2.6-3.5 EUR/sq.m/month).