Stability returns

At the end of June 2023, the average vacancy rate for Poland stood at 6.9 pct, which translated into 2.2 mln sqm of available space. Despite the temporary pause in new mega-shed and BTS construction, developers are still eager to launch small and mid-sized multi-tenant speculative investments. As of June 2023, total stock amounted to 31.5 mln sqm. New developments delivered to the market in Q2 2023 were close to 1 mln sqm. However, the amount of new space is anticipated to continue its decline in the coming months. Average rents in the Big Five markets rose by 5.3 pct compared to December 2022 and in June 2023 ranged from EUR 3.5 to 5.75 per sqm / month with regard to suburban logistics parks. City locations still display slightly higher growth momentum, increasing by 7.1 pct compared to Q4 2022. Values are now up to EUR 8.5 per sqm / month in the Warsaw Inner City area.

Back to the pre-Covid dynamics

“Although the gross demand of 970,000 sqm observed in Q2 was in line with the results from the previous quarter, the sum of new deals and expansions improved by 11 pct q-o-q. This result lagged behind the five-year H1 average by 24 pct but was close to the average for 2018–2020, which was then described as strong and vigorous,” says Maciej Kotowski, the director of research and consultancy at JLL.

A pick-up in demand from production companies accounted for some 31 pct of H1 new demand and was just behind retailers (32 pct) and logistics operators (36 pct). Despite the slowdown in the e-commerce business, which was reflected, among others, in the drop of the online share in total retail sales to 7.7 pct in June 2022, it seems that the industry has not come to a complete standstill in Poland, with almost 200,000 sqm taken up in H1.

Tenants most active in Upper Silesia

Beyond any doubt, Upper Silesia remained the most sought-after destination, with 366,000 sqm (net) signed in the region in H1 2023. Although the overall take-up was again dominated by the Big Five markets, which together were responsible for some 70 pct of new demand, activity was observed in numerous locations across Poland, both in established and emerging destinations.

Positive results were seen in the top regional markets, including Szczecin, Kraków, the TriCity and Lubuskie. Altogether, deals for a total of 300,000 sqm were signed, with the largest deal taking place in Szczecin (56,000 sqm, by a production firm). A significant share of the new demand was also attributable to the group of smaller markets. A combined total of 116,500 sqm was contracted in Lublin, Rzeszów, Opole, Białystok and Kielce.

Space under construction at a stable level

As of June 2023 the under-construction pipeline stood at 2.5 mln sqm, and was pretty much evenly divided between secured and speculative developments. Unsurprisingly, the majority of this space was attributable to the largest markets, which was especially seen in the amount of speculative construction. Almost 85 pct of unsecured developments are located within the Big Five and Lubuskie, underlining the current cautious approach.

“The fact that the volume of new supply under construction is almost at the same level as three months ago means that developers launched almost the same amount of space within new projects in the second quarter as they completed. This therefore confirms the stabilisation of developers’ activity, similar to the dynamics observed throughout 2018-2019,” says Tomasz Mika.

Yields continue on their upward trajectory

During H1 2023, a combined total
of EUR 438 mln was transacted across 14 deals, the largest of which was the acquisition of Campus 39 by P3 for almost EUR 140 mln. Another significant deal was the sale of City Logistics Wrocław II purchased by Czech investor – Trigea, proving the current increased activity of CEE investors. In terms of schemes with long-term agreements, among the most noteworthy was a logistics property located in Swarzędz near Poznań, which was bought by Palmira from Akron Group. The parties have agreed not to disclose the purchase price.

“At the end of June 2023, the prime warehouse yield for a multi-tenant scheme with a five-year lease agreement was estimated to be at app. 6.4 pct for the main regional markets and around 6 pct for urban projects in Warsaw,” says Sławomir Jędrzejewski, the head of CEE industrial investment at JLL.

About JLL

JLL is a professional services firm that specializes in real estate and investment management, with annual revenue of 20.9 USD billion, operations in over 80 countries and a global workforce of more than 103,000 as of December 31, 2022.