Total industrial stock in Poland now stands at 16.9 million sq m. Gross take-up in the first half of 2019 exceeded 1.6 million sq m. In addition, over 1.1 million sq m of new space was delivered to market and 2.2 million sq m is under construction.
Advisory firm JLL summarizes the situation on Poland's industrial market at the end of H1 2019.
Demand
Robust demand has spread all over Poland. Gross take-up exceeded 1.6 million sq m and - interestingly - it was generated by a number of medium-sized contracts instead of spectacular transactions. In turn, net demand, i.e. taking into account new contracts and expansions, was 1.1 million sq m.
Tomasz Mika, Head of Industrial Poland, JLL, comments: "In the first half of the year we observed a decrease in the share of new contracts and expansions in total demand. However, nearly 350,000 sq m of space was leased as part of renegotiations of existing contracts. One of the factors determining this situation was undoubtedly the expiration of lease agreements signed in 2013-2014, when the market was experiencing a period of intense development"
Logistics operators is the most active tenant segment, followed by retailers and light manufacturing companies. These three sectors together accounted for almost 80% of net demand recorded in H1 2019.
Demand for industrial space was visible throughout the country, with the highest tenant activity being recorded in the Warsaw Suburbs, where agreements for a total of 460,000 sq m were signed, followed by Wrocław - 276,000 sq m and Central Poland - 216,000 sq m. On markets outside the Big Five, gross demand was 240,000 sq m, of which new agreements accounted for 186,000 sq m. The development of Kielce, Podkarpacie and Białystok continues apace as developers secure more land for future projects in these areas
Major new leasing transactions H1 2019
|
Tenant |
Park |
Area (sq m) |
|
Pantos Logistics |
Panattoni Park Wrocław XI |
60,500 |
|
Pepsico |
P3 Mszczonów |
58,500 |
|
Gefco |
Panattoni Wrocław X North Gate |
32,500 |
|
Raben |
A2 Warsaw Park Grodzisk |
30,100 |
|
RTV Euro AGD |
Goodman Warsaw Logistics Centre |
26,400 |
Source: www.warehousefinder.pl
Supply – just shy of 17 million sq m
The buoyant condition of Poland’s industrial market was once again confirmed by excellent activity on the construction side.
“During the first two quarters of the year new developments totaled more than 1.1 million sq m, the highest half-year result in the history of the market. This led to total stock standing at almost 16.9 million sq m”, comments Maciej Kotowski.
Central Poland remains the leader in terms of the volume of new supply, where over 250,000 sq m was delivered in the first half of 2019. It was the fastest growing market in Poland with a total stock increasing by over 35% over the last twelve months.
At the end of H1 2019, 2.2 million sq m of space remained under construction, of which the largest markets - Upper Silesia, Wrocław, Central Poland, Warsaw and Poznań – accounted for 86% of this number. It is worth noting that developers are bullish about the Polish market, which is confirmed by the volume of space built on a speculative basis - the share of which now totals 45%. This is particularly visible in the largest metropolitan areas - over 270,000 sq m was being developed on a speculative basis in Upper Silesia, followed by about 175,000 sq m in Warsaw and Wrocław, and 140,000 sq m in Central Poland. Large speculative investments can also be found in the Tri-City, Szczecin, Krakow and Kujawy
Vacancy rate and rents
The increase in space developed on a speculative basis has led to a slight increase in the vacancy rate. The average vacancy rate in Poland was 6.3% at the end of H1 (5.7% in Q1). This situation can change quickly, as vacant space is absorbed on a regular basis due to high demand from tenants. A good example of this is Białystok, where the vacancy rate dropped from 36% to 22% in just one quarter.
In Q1 2019 tenants saw a gradual increase in rents. This slight uptick is still limited, however, by the amount of new supply. An increase was particularly noticeable in Warsaw, Wrocław, Poznań, Szczecin as well as in Opole and in the Lubuskie region. The rents in Warsaw Suburbs increased to EUR 3.8/sq m/month. Warsaw Inner City remains the most expensive market, with headline rents ranging from EUR 4.3 to 5.25/sq m/month. The most attractive rents are offered for big-box units in Central Poland (2.6 - 3.2 EUR/sq m/month).
Investment market
The volume of industrial investment transactions concluded between January and June 2019 was 374 million EUR. This is the best ever H1 performance in terms of investment activity, and was helped by the inflow of Asian capital, especially from South Korea. Continued interest in the Polish market in the upcoming months, is reflected by ongoing transactions involving both individual objects and real estate portfolios
The largest investment transactions concluded in H1 include the acquisition of Amazon in Wrocław and Eurocash in Konin by Hines/Mirae from Blackstone for EUR 130 million, Zalando Lounge distribution center by Hines/IGIS AM from Hillwood (for EUR 85 million) and Castorama in Stryków by Tritax from Panattoni (for EUR 55 million).
Prime warehouse yields stand at 6.25% (with a downward trend of below 6%), while exceptional, long leased assets trade at sub 5.00% and Warsaw inner city projects at around 5.50%.