The warehouse space market in Poland is rated very highly. New facilities are constantly appearing on the map of Poland, and our logistics infrastructure is on par with European quality. What impact does this have on rental rates in the logistics industry?
Paweł Sapek, Country Manager Prologis in Poland: Despite favorable market conditions and a developing economy, Poland records the lowest level of effective rents among all developed economies in the world. Rents in our country are significantly lower than in Western European countries. Experts point to two main reasons for this situation. One is the 2009 economic crisis, which severely shook the warehouse industry, and the market situation has not returned to its former state since then. The second important issue is the low transparency of transactions concluded in the warehouse real estate market, which depends on the ability to easily define both the real costs that the client will incur for renting and the real income that the property will generate for the developer. Therefore, it is particularly important to distinguish between rent values, i.e., the monthly fees paid by the client for renting a given property. The nominal rent is the initial rate offered by the property owner, while the effective rent takes into account all rent-free periods and other discounts and bonuses offered by the developer at the beginning of the lease agreement. In Poland, there are large disparities between the nominal rent and the effective rent, i.e., the one that the tenant actually pays. The lack of transparency regarding effective rental rates is mainly caused by the structures of lease agreements and the fact that both some landlords and tenants agree to additional financial incentives that are granted outside the main lease agreement. This distorts the image of the market and makes it less transparent. Consequently, it is difficult for tenants to compare offers available on the market, and for investors to realistically assess the value and profitability of a given investment.
Slowly, however, the warehouse real estate market is becoming more transparent, so we can expect an increase in investor interest in investment projects in Poland. The most important factors driving rent growth in 2018 will be: positive economic stimuli, such as the 4% GDP growth of our country projected by the World Bank, the vacancy rate which has fallen to record low values on the market, as well as rising construction and land purchase costs. Already in 2017, the first increases in rental rates could be observed – the largest in the vicinity of Łódź and Poznań (an increase of approx. 5%), and in Upper Silesia, rates increased by 2.5-5%.
Forecasts for all of Europe are optimistic. According to the “Logistics Real Estate Rent Index” report published in 2018 by the Prologis Research and Development Department, the growth rate of effective rents in European markets has been systematically increasing over the last three years. 2018 will be the best year in a decade, with growth at the level of 2.5%. Poland will also follow this trend, but at a slower pace and starting from the lowest rent level on the old continent.