Good macroeconomic results are positively stimulating the development of the warehouse and production space sector in Poland. Strong demand at the level of 1.27 million sqm and a falling vacancy rate in all regions is motivating developers to launch further investments not only in mature markets but also in new locations. 680,000 sqm of modern industrial space remains under construction, of which 172,000 sqm are speculative investments. At least another 100,000 sqm is at the stage of preparing building permits.
DEMAND
At the end of June this year, gross demand, i.e., new leases, expansions, and renewals, amounted to 1.27 million sqm and was 350,000 sqm higher than in the same period in 2014. 63% of transactions consisted of new lease agreements and client expansions in existing locations. The largest amount, 270,000 sqm, was leased in the Central Poland region and Warsaw and its surroundings. The highest net demand of 164,000 sqm was also recorded in Central Poland, followed by the Poznań region and Upper Silesia. Outside the main regions, there was a visible increase in demand in new markets such as Lublin and Rzeszów, where a total of over 100,000 sqm was leased.
– The current economic growth is based on more solid foundations than during previous business cycles. Low inflation persists, we are observing reasonable growth in lending and a decreasing current account deficit, and additionally, private consumption is growing steadily, which indirectly translates into the dynamic development of the industrial real estate market in Poland – commented Renata Osiecka, Managing Partner at AXI IMMO. – A significant part of the new demand in the sector is generated by companies related to the end-consumer market. We estimate that at the end of this year, net demand may exceed last year’s record of 1.4 million sqm.
In the demand structure in the first half of the year, logistics operators traditionally had the largest 33% share, but it is worth noting the higher activity than in previous years of companies from the home and interior sector and the broadly understood electronics sector, which accounted for 17% and 13% of the total recorded demand, respectively.
SUPPLY
In the first half of the year, 472,000 sqm were delivered to the market, which is an increase of 58% compared to the same period of the previous year. The market in Poznań grew the most, by 182,000 sqm as part of 5 investments.
– We are observing high developer activity; over 680,000 sqm of modern warehouse space is under construction, of which over 170,000 sqm is speculative space. Compared to the same period last year, the volume of speculative space under construction is more than twice as high. It is worth noting that in addition to the large number of projects under implementation, developers have secured land for new investments in almost every market. This applies not only to mature markets like Warsaw or Poznań but also to new locations such as Bydgoszcz or Lublin – explains Renata Osiecka.
VACANCY RATE
At the end of Q2 2015, the vacancy rate was 5%. This is a decrease of 0.7% compared to Q1 of this year. Year-on-year, it fell by 5.4%. This is historically the lowest average vacancy level in Poland. A total of 480,000 sqm remains available for lease. In all regions, space availability has fallen below 10%. The most vacant modules remain in Warsaw (9.7%) and its surroundings (9.5%), followed by Upper Silesia. The lowest vacancy level, below 3%, occurs in Poznań and Wrocław. It is also worth noting that some space is occupied under “short-term” contracts, which are not formally counted as leased space.
RENTS
In the last six months, rents remained at a stable level and will remain so in the coming months, despite the low vacancy level. We can expect slight increases in Central Poland due to low space availability and a lack of speculative investment projects.
FORECASTS
In the second half of the year, we can expect the maintenance of high developer activity. The low vacancy level will encourage developers to launch further investments. It is possible that some of them will be implemented speculatively, some mainly in the Warsaw region and new locations after signing pre-let agreements.
In terms of demand, the upward trend should continue, mainly due to the development of companies already present on the Polish market and foreign investments. The sectors with the greatest development potential will remain the FMCG, electronics, and home and interior sectors, especially in the e-commerce sales channel.