There was a slight decline in net demand for warehouse space in Poland, down 9% on the same period last year.
Logistics operators continue to account for the largest share of demand in the European and Polish markets. Efforts to increase the stability of supply chains are generating additional demand from this sector. In Poland, logistics operators were responsible for as much as 45% of new demand.
The activity of the manufacturing sector is increasing, which seems to confirm the expected demand generated by reshoring. A renewed increase in vacancy rates to above 5%, driven by exceptional construction activity. Poland is now the most active development market in Europe, accounting for 25% of new stock in Q1-Q3 2022. Rental rates in Poland are recording further increases, but at a much slower pace. The biggest changes can be seen in large cities, e.g. in Warsaw the base rent now stands at €7.2/ sqm/month.
More space in the hands of logistics companies
Demand for warehousing space in Poland remains at a high level, was although weakening slightly in the last quarter. Total demand in the first three quarters of the year was 4,300,000 sqm, with 75% of this number accounted for by new contracts and expansions. The Big Five markets were, as per usual, the most popular. These major markets were once again followed by the Tri-City and Lubuskie markets, with both exceeding 240,000 m2.
The leading role in shaping demand once again fell to logistics operators. At the end of September, the sector’s total contracted space exceeded 1,300,000 sqm net, accounting for 45% of total new demand. Also noteworthy was the significant increase in demand from the manufacturing sector, driven by automotive and e-automotive, which accounted for as much as 23% of demand in the first nine months.
"The monitoring of the global economy and the associated forecasts reinforce market participants' earlier decisions on the need to increase inventory in Europe. We are seeing higher activity in the market from logistics operators and the manufacturing sector, which are intensively looking for new space to secure tight supply chains," - says Ludwika Korzeniowska, Senior Director, Industrial Agency JLL.
Developers more conservative
In Q3 2022, the vacancy rate returned to above 5%. The approximately 1.4 million sqm of available space is the result of, among other things, the record development activity (including speculative development) observed in recent quarters. However, this space is dispersed in many parks across Poland, which does not help to alleviate the imbalance of supply and demand in the most popular markets.
In the past quarter, 3,990,000 sqm of warehouse space was in the pipeline, including new developments of 1,000,000 sqm. As much as 46% of the space under construction was built on a speculative basis, with the majority of projects in the Big Five markets and the Lubuskie region.
Although the volume of space under construction fell below 4 million sqm, this is still a very high figure. Moreover, developers have started new developments totalling one million sqm with than 46% being built on a speculative basis.
"The natural reaction to the announced economic slowdown among developers is the adoption of a more cautious approach. For this reason, new projects are more likely to be undertaken in locations that guarantee consistently high interest. Other, less secure developments are now often postponed," explains Tomasz Mika, Head of Industrial Agency, JLL.
Rents continue to go up
Q3 2022 saw further increases in rents, but the rate of change was not as sharp as before. Compared to last year, rental values saw a 30% hike depending on the location.
At the end of the analysed period, the highest base rent, exceeding EUR 7/sqm/month, was recorded in the capital, while the most favourable rental conditions fluctuated around EUR 3/m2/month for locations near Warsaw.
Transaction volume maintains record levels
The value of investment in the warehousing sector after Q3 was the third best result for the period on record. This high volume was driven in part by CBRE IM's purchase of the Danica portfolio from Hillwood. Other key transactions included the sale of Panattoni parks in Gdańsk by Invesco to EQT Exeter, the acquisition of Lublin and Zabrze by Brookfield Asset Management from Panattoni and the CTP Group’s purchase of the Polish 7R project portfolio.
"The number of ongoing transactions allows us to assume that the total investment volume should exceed €2 billion this year. On the other hand, we are seeing rising financing costs and the potential risk of a recession, which could affect both sentiment and prices," explains Sławomir Jędrzejewski, Head of Warehouse Real Estate Capital Markets in Poland, JLL.
At the end of Q3 2022, yields were 5.5% for typical multi-let warehouses, 4.75% for Warsaw projects and 4.5% for warehouses with leases of 10 years or more.
