The last of the fun before lent?

There were no surprises. It was 
a magnificent year that went exactly according to plan for companies on the warehouse market. Poland is a real tiger in this part of Europe

It might have seemed that most of the people working on the Polish real estate market late last year were from the warehousing department of the Cushman & Wakefield agency, none of whom were ever at their desks. Until, that is, you learnt they were sunbathing on the other side of the Pond, as a prize for what those lucky agents had achieved in 12 very successful – even sensational – months. The boom was enjoyed by everyone in the sector.

One record after another

The Polish economy has moved into top gear and continues to move forward at an impressive speed. Consumption is on the up, while UEFA’s decision last year to stage the Euro 2012 football championships in Poland and Ukraine has injected adrenaline into the painful issue of improving the road infrastructure. Developers have also not been idle in the past few months. Colliers International’s data for 2007 reveals that 1,1 mln sqm of modern warehouse space came on to the market, with the majority developed by ProLogis, the market leader. The position of the American developer was strengthened last year after its acquisition of Parkridge’s warehousing business, with both companies’ joint delivery to the market being 29 pct of the total space. ProLogis, which celebrated the tenth year of its activities in this part of Europe several months ago, is followed closely by Panattoni, which made its first entry into Poland a relatively short time ago (in 2005) but now accounts for 22 pct of the market. Segro takes third place (17 pct), whose Tulipan Parks have been expanded in Poznań and Stryków (where an additional 24-ha of land has been bought), in Łódź (in the Widzew district with 6-ha and 30,000 sqm leased from Q3 of 2008), and Nadarzyn (130,000 sqm of leased space).

Location magnets

The ranking of warehouse surface leaders is much the same if seen from the point of demand contracts. According to Colliers International, leasing contracts were signed for 1,4 mln sqm in 2007 as a whole. In comparison, the figure for 2006 was 913,000 sqm (according to Cushman & Wakefield). ProLogis heads last year’s ranking with 33 pct, followed by Panattoni (32 pct!) and Segro. The largest deal of 2007 was finalized by Panattoni: logistics operator DSV selected the developer’s Teresin-based complex where it signed up for 35,000 sqm,.The US firm also scored a success with Raben, with the latter signing a contract to lease 26,000 sqm in Panattoni Park Robakowo, a Poznań suburb. Goodman (previously Eurinpro) also had something to be proud of by developing facilities in Crystal Park in the Pomeranian Special Economic Zone in Łysomice near Toruń for NYK Logistic (a total of 23,300 sqm). Maciej Chmielewski, head of Colliers International’s industrial department, summarizes the situation: “2007 was, first and foremost, a period of enormous demand far exceeding supply. The most popular locations were Upper Silesia, the second zone in Warsaw, the Wrocław area and central Poland - that is, facilities around Łódź and Stryków. New locations also popped up on the warehouse map, e.g. Szczecin, Toruń and Kraków.”

Panattoni and ProLogis have both decided to develop here in the northwest of Poland - the latter in ProLogis Park I, where the target surface is 105,000 sqm, and with 45,000 sqm available for lease in the second quarter of the present year. Goodman last year decided to move into the south of Poland when it bought 31.5-ha of land in Modlniczka near Kraków for the development of 158,000 sqm of warehouse space. Much is also happening on the Baltic coast where several new investors are to follow trail-blazers ProLogis and Biuro Inwestycji Kapitałowych, even though many were sceptical at the time of the first development activity near Gdańsk. The market is being closely watched by such companies as AIG/Lincoln and Segro.

In the opinion of Maciej Chmielewski: “This year and in following years will certainly see the focus fixed on Silesia and perennial ‘sure bets’, such as central Poland and - of course - Upper Silesia. But I feel it is still too early for serious investment in the east of the country, e.g. Rzeszów or Białystok, especially when developers continue to see such enormous growth prospects in current locations. I would say that greater growth prospects exist in Radom, for instance, which is nearer Warsaw and still has an unexhausted local labour market, than in the east.”

Wind in your eyes

Real estate agents describe the present situation as a developers’ rather than a tenants’ market. It only needs a glance at the vacancy rates to understand why. The average figure for the entire market stands at 6 pct. The lowest are in Kraków and Wrocław (0 pct), Warsaw (4 pct in zones I and II) and Silesia (5 pct). The largest amount of unoccupied space is in Gdańsk (17 pct). According to an expert from Colliers International: “From the beginning of the year we are already noticing a rise in rents, I would say by around 5 to 10 pct.” Tomasz Mika of Cushman & Wakefield’s warehouse department adds that the surge in rents, in his opinion, is as much as 15 pct.

The rise in rents was related to the rising costs involved in construction, which also influence the real estate sector of the market. The mood of developers was also not improved by rocketing land prices and the increasingly painful lack of labour in some locations. But for the moment at least, market players are not being put off by these aggravations complicating their business.

Maciej Chmielewski remarks that: “1.065 mln sqm of space is currently under development - mainly in Upper Silesia, but also in Warsaw’s first and second zones. I would say that Warsaw’s position, which had weakened when compared with previous years, seems to be reasserting itself in developers’ portfolios.”

But the first clouds have appeared in a clear sky, as developers ponder the impact the troubled US market will have on the scene here in Poland. Agents are also taking a more sombre look at the future. Tomasz Mika of Cushman & Wakefield’s warehouse department sums this up: “2008 will probably witness a slight cooling of the warehouse sector. 2007 was a record, but a crisis seems imminent, while this year could prove somewhat worse if only in terms of demand. Developers are well prepared for this: land banks have been established and new personnel have been taken on.” n