Logistic companies contract the most
Demand for warehouse space continues to grow. In Poland, net demand reached 2,400,000 m2 at the end of June, slightly up on the same period last year.
As much as 73% of the share of total net demand was claimed by the Big Five markets. In turn, among the regional markets, the Tri-City and Lubuskie stood out, where demand exceeded 160,000 m2 in both markets. Contract renewals remained stable at 24% of total gross demand. It is estimated that the number of renewals signed may soon increase due to approaching expiry dates of contracts signed between 2016 and 2018.
Among the sectors shaping demand in Poland, logistics operators were the most active. In the first half of the year, they contracted more than 1,000,0000 m2 of space, which put them well ahead of other market participants. They were followed by retail chains, which were responsible for 745,000 m2 and the ever-growing manufacturing sector with demand of nearly 500,000 m2.
The demand for off-the-shelf space is constantly evident in the Polish market, which is why developers are choosing to develop projects on a speculative basis. At the end of Q2 2022, the total space under construction in these projects exceeded 2 million m2, which is approximately 50% of the total space under construction. Interestingly, Lubuskie is the most dynamic market in terms of developer activity.
"The market is measuring itself against structural changes in international supply chains, which translates into a significant increase in activity in the logistics sector. Logistics operators are intensively looking for space, especially space that is available immediately," explains Ludwika Korzeniowska, Senior Director, Warehouse Leasing, JLL.
Low vacancy rates motivate developers
At the end of Q2 2022, the vacancy rate had fallen to 4.6%, which in practice means that the available space in all warehouse parks in Poland totals 1.2 million m2.
The active activities of construction companies in Poland provided a new supply of 2,400,000 m2 in the analysed period, representing 30% of Europe's new supply. Most new space was supplied to the Wrocław, Upper Silesia, Central Poland, and Szczecin markets.
At the end of H1 2022, developers were building as much as 4,450,000 m2 of warehouse space in Poland, ranking the country second in Europe. Construction of 1,300,000 m2 started in Q1, while 900,000 m2 began in Q2, driven by issues connected with accessing construction materials.
Another increase in rents
Q2 2022 saw a further increase in rents, with those in new developments seeing up to a 30% increase compared to the end of 2021. The largest rent rises were in urban locations. In Warsaw, prices were 6.9 euro/m2/month. Central Poland remained the most favourably priced, where rents ranged between 3 and 4 euro/m2/month.
"Rising rental rates are mainly related to new projects. This is the result of, among other things, rising construction costs, land prices and financing costs. Despite the increases, Poland still remains one of the most attractive locations in Europe in terms of rental levels," comments Tomasz Mika, Head of Warehouse Leasing, JLL.
Transaction volumes at last year's record level
In the first half of 2022, the value of warehouse investments was the third best in the market’s history. The largest transaction was the sale of Panattoni Park Gdansk Airport for close to EUR 112 million. Others major deals were the purchase of a portfolio of three Warsaw Cromwell properties by Partners Group and Peakside as well as the sale of the 7R portfolio to CTP Group.
There is a considerable lengthening of decision-making processes in the market, but the potential of the projects in the pipeline makes it possible to estimate an increase in investment volume of an additional one billion euros.
"Total transaction volume recorded in the first half of the year is comparable to the volume recorded over the same period in 2021, which was a record year from this perspective for the entire investment market. Despite many new challenges we continue to see sustained investor interest and the value of transactions in advanced stage of execution allows us to expect a strong year end results," says Sławomir Jędrzejewski, Head of Warehouse Real Estate Capital Markets in Poland, JLL.
Yields for top multi-year warehouses with a five-year average lease length are estimated at 5.25-5.5%. Warsaw projects stand at 4.4-4.6%. Assets with longer leases (10 years) are trading below 4.50%, while exceptionally leased assets (15 years and longer) can achieve 4.25-4.35%.
