Eastern Poland Industrial set to bloom

‘Eurobuild Central & Eastern Europe’: When looking at warehouse and logistics space in eastern Poland, will this region benefit from improvements in infrastructure and become more attractive to the sector?

Adrian Semaan (AS): The core logistics locations in this part of Poland are Lublin and Rzeszów, which together account for app. 390,000 sqm of warehouse space, or around 3.3 pct of the country’s total stock. Despite sustained occupier and developer interest over the past few years, leasing activity in this region remains subdued in terms of both the number and volume of lease transactions. Since the beginning of 2016, there have been 24 lease transactions with an average size of around 4,500 sqm while the national average is 6,150 sqm. The main reason for the lack of large deals recorded with retailers and logistics operators is the limited level of distribution activity on these local markets. In 2016, the Podkarpackie region attracted app. EUR 153 mln in investment from three companies from the automotive and aerospace sectors: Hutchinson Poland, Aero Gearbox International and Hispano Suiza Polska.

What are the prospects like? Is there a market recovery on the way?

AS: Recent investments in roads have significantly improved access to Białystok, Kielce, Lublin, Olsztyn, Rzeszów and their neighbouring towns. Further projects are underway including key expressway sections that will connect Białystok (S8) and Lublin (S17) with Warsaw. This has improved the attractiveness of these local markets, in terms of access to labour markets and public services, boosting business growth and attracting investors to the greater region. The region’s growth is also being fuelled by the European Regional Development Fund’s Operational Programme Eastern Poland 2014–2020.

Joanna Sinkiewicz (JS): With new structural investments and a strong labour market, eastern Poland is becoming an increasingly attractive location to launch new warehouse projects. There are already a few manufacturing and warehouse schemes under construction near Lublin (Goodman, MLP, Panattoni, CLM) and Rzeszów (Panattoni, Waimea Holding), while Panattoni is developing its first logistics parks in Białystok and Kielce.

How long is the boom on the warehouse market likely to continue? Are there any reasons for concern about its current state?

AS: Alongside e-commerce, the automotive sector also represents another driver of the Polish logistics market. The foreign investments of global companies such as GM, Toyota, Volkswagen and Daimler-Mercedes are bringing in an increasing number of subcontractors.

Will rising development and labour costs lead to diminished interest in the Polish warehouse market?

JS: Rising construction costs and strong growth are likely to push rents up. However, because this upward pressure is being offset by competition among developers, we’re not expecting any drastic changes in rents. Poland now offers the lowest effective rents in Europe. The potential risks include rising labour costs and a shortage of skilled workers. Poland sometimes loses large manufacturing projects to Romania, Serbia or other countries that can offer a larger and cheaper pool of labour.