Savills A STORY OF REGIONAL GROWTH

In H1 2019, the warehouse and industrial market in Poland maintained its strong momentum, according to the latest research by Savills. In the first half of the year, new supply reached a high never before recorded. At the same time vacancy remained low, while net absorption increased y-o-y.

At the end of June 2019, modern warehouse and industrial stock in Poland stood at 16.8 mln sqm. Warsaw (both zones I and II) remained the largest market with over 4.1 mln sqm (25 pct of the total stock). The stock in Central Poland (2.73 mln sqm ‒ 16 pct of the country total) overtook Upper Silesia (2.66 mln sqm ‒ 16 pct). The next two largest markets are Poznań with 2 mln sqm (12 pct) and Wrocław with 1.8 mln sqm (11 pct).

Other markets are significantly smaller with stock below 1 mln sqm. However, they have been growing rapidly. In H1 the TriCity market increased by 25 pct, with 119,600 sqm of new space as three projects were delivered: Panattoni Park Gdańsk III (56,800 sqm), two phases of 7R Park Tczew (46,400 sqm) and Panattoni Park Gdańsk IV (16,400 sqm).

High levels of activity have also been seen in Szczecin and Kraków. Both markets over the first six months of the year grew by 15 pct, which is more than double Poland’s average. In Szczecin 92,700 sqm was completed in four projects, of which the largest were Panattoni Park Szczecin II (37,400 sqm) and two phases of Panattoni Park Szczecin I (31,300 sqm). In Kraków, 70,100 sqm in two projects was added to the market, namely, in two phases of 7R Park Kraków (64,100 sqm) and an extension of Goodman Kraków Airport Logistics Centre (6,000 sqm).

The rapid growth of the market in recent years, the low unemployment rate and the improving road infrastructure have resulted in new locations emerging, such as Białystok, Kielce, Opole and Zielona Góra. In Kielce 45,000 sqm was delivered in H1, representing an almost threefold increase in the city̕s stock.

Supply surges ahead

Over the first six months new supply came in at a huge 1.1 mln sqm – up by 47 pct y-o-y and the highest amount ever recorded for the first half of a year. New supply was particularly high in Central Poland, where 246,500 sqm was delivered (accounting for 23 pct of the country’s total volume). The bulk of the new space was delivered outside the main markets including 165,500 sqm in three projects: a BTS for Zalando in Olsztynek (120,600 sqm), 7R Park Kielce (22,700 sqm) and Panattoni Park Kielce (22,200 sqm). Warsaw also saw high levels of new supply (165,100 sqm).

Developers are not slowing down. At the end of June the volume of space under construction stood at 2.25 mln sqm, second only to that seen in H1 2018 (2.26 mln sqm). Most of the space was in Upper Silesia (562,000 sqm, 25 pct of the country’s total volume). In Warsaw there was a spike in development activity with 398,600 sqm under construction, up 80 pct y-o-y. Around 16 pct of the volume was in Central Poland (357,000 sqm). The Wrocław market also saw a rise in activity (325,300 sqm), up 43 pct y-o-y. Of the projects under construction, three were above 100,000 sqm and all were being built by Panattoni: BTS Gliwice (210,000 sqm), Central European Logistics Hub (112,000 sqm) and A2 Warsaw Park (103,700 sqm).

In the smaller markets, high development activity was seen in western Poland. This is one of the youngest markets in the country and has emerged due to the low unemployment on other markets, investment in road infrastructure and its proximity to Germany. At the end of H1 around 127,800 sqm was under construction in the region (accounting for 6 pct of the total volume).

Urban logistics is still on the rise. Currently 52,100 sqm is under construction, with the largest projects being 7R City Flex Warsaw Airport (13,900 sqm), City Logistics Warsaw Airport by Panattoni (10,700 sqm) and Ideal Idea City Park by Formad (10,500 sqm).

Tenants still hungry

In the first half of the year 1.8 mln sqm of warehouse and industrial space was leased, down by 16 pct y-o-y. The highest leasing activity was in Warsaw with around 578,700 sqm (47 pct more than in the previous year). The second highest volume was in Wrocław (302,100 sqm), while 279,000 sqm was leased in Central Poland. Among the largest transactions were a lease renewal by Jysk in Logistic City Piotrków Trybunalski (60,000 sqm), a new lease by Pantos Logistics in Panattoni Park Wrocław XI (59,200 sqm) and a new lease by PepsiCo in P3 Mszczonów (58,500 sqm).

The level of net take-up remained relatively high at 66 pct. Excluding the smallest markets, where no lease renewal or renegotiations were recorded, a very high level of net take-up was recorded in the TriCity (95 pct) and Wrocław (94 pct).

Demand for urban logistics remained strong. Net absorption in H1 came to around 31,000 sqm (stable y-o-y). Some of the new leases finalised were Bufab in 7R City Flex Gdańsk (5,300 sqm), Specjał in 7R City Flex Szczecin (4,400 sqm) and Ventia in Ideal Idea City Park (2,000 sqm).

Net absorption also remained strong and matched the supply, coming to 1.0 mln sqm, up 14 pct y-o-y. Take-up was the highest in Central Poland (200,300 sqm), the second biggest volume (around 152,500 sqm) was recorded outside the main markets, mainly due to the completion of a BTS project for Zalando in Olsztynek. In Warsaw 145,300 sqm was absorbed.

As a result vacancy rates at the end of June 2019 remained low at 5.1 pct, down by 0.4 pp q-o-q. The lowest rate (excluding Western Poland and Szczecin, where no space was available) was in Wrocław and eastern Poland, with a vacancy of 2.1 in both regions. In the TriCity vacancy was also low at 2.3 pct. The highest availability was seen in Upper Silesia (7.6 pct) and Poznań (7.5 pct).

After rising in 2018, due to increasing construction costs, rents in H1 2019 remained strong but stable in most of the country’s markets. Rents grew in Warsaw II and Wrocław. Headline rents range between EUR 2.70 per and EUR 4.20 per sqm per month for big box and multi-tenant occupiers, and up to EUR 5.35 per sqm per month for SBUs. Effective monthly rents range between EUR 2.20 and EUR 3.60 per sqm for Big Box units and up to EUR 4.80 per sqm for SBUs.

The future still looks good

The outlook for the end of the year is positive. Considering developers’ plans for new supply, 2019 should turn out to be a record year with around 2.5 mln sqm delivered. Despite the high level of new space to be added to the market, vacancy rates are not expected to rise quickly, as 60 pct of the space under construction is already pre-leased. An unforeseen economic slowdown could impact the demand for space; however, this might be countered by measures to stimulate the economy in the run-up to the Polish general election. ν