The warehouse market is not slowing down
The warehouse market is not slowing down

Industrial

The warehouse market is not slowing down

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According to the latest report entitled At a Glance – Industrial (Q4 2016), the last quarter of the previous year on the warehouse and logistics market was marked by continuously high demand, which yet again crossed the one million sqm threshold in Q4 only and for the entire year achieved a total result of 3.29 million sqm. At the end of 2016 the total stock of logistics and warehouse space in Poland stood at 11,181,000 sqm, which means an increase in supply by 12.8% y-o-y.

The positive run for the domestic logistics and warehouse market continues and will continue. There is potential for further growth as confirmed not only by the increasing number of schemes under construction and those fully leased, but also by the extremely stable foundations for expansion of the sector. The trust shown in the domestic market by investors is also of importance here.

The prospects for further growth of the logistics market will be shaped by geopolitical decisions, including Brexit. We are carefully analysing its possible consequences and are striving to define the needs of the part of businesses from Western Europe that due to the need to optimize costs could take the decision to relocate their centres and services to Poland.

Katarzyna Pyś-Fabiańczyk, Head of Industrial & Logistics, Central and Eastern Europe

Development, supply and fast commercialization

From one year to the next the domestic warehouse and logistics sector keeps breaking new records. At the end of Q4 2016 the volume of space under construction exceeded 1.5 million sqm. This means a 24% increase as compared to the previous, also record breaking, quarter, and a 47% increase year-on-year.

The last three months of 2016 were also record-breaking in terms of delivery to the market of new warehouse and logistics space, where the supply increased by approximately 250,000 sqm, while for the entire 2016 it was 1.33 million sqm. The authors of the report stress that despite the intensifying developer activity that has been in evidence for several years now – the result of which is the dynamically increasing volume of supply – new warehouse schemes find tenants quickly. The dynamic nature of the market is further supported by the fact that frequently speculative projects are already to a large extent leased at the moment of their completion.

Additionally, the high level of demand in Q4 2016 affected the vacancy rate, which stood at 6.1% and was 0.5 percentage points lower as compared to Q3.

Client tailored

One of the reasons behind the continued low vacancy level is the undiminishing popularity of Built-to-Suit schemes (BTS). A case in point here is the industrial and logistics hub in the Szczecin region. Only as far back as mid-2016 there was not a single new scheme under construction on this relatively small market. Whereas, at the end of Q4 the volume of supply under construction stood at more than 313,000 sqm. Nearly 93% of the pipeline supply comes in the form of two BTS schemes. This gives the Szczecin market the first position in terms of space under construction

Westbound

As far as the largest agglomerations are concerned, it is increasingly more difficult to acquire attractively located land offered at the right price. Additionally, developers are also realizing that the availability of qualified staff is decreasing and labour costs are increasing, as a result of which there is greater interest and consequent growth of alternative markets.

There are now opportunities for smaller warehouse markets. The second half of the year saw a considerable increase in interest in land near the country’s western border. In addition to the dynamically growing Szczecin market, developers and tenants are now targeting the Lubuskie voivodship that benefits from the natural asset in the form of its location and is also characterized by the extremely well-developed infrastructure. These are arguments that appeal to businesses from Western Europe aiming to optimize their costs.

Anna Staniszewska, Head of Research & Consultancy, Central and Eastern Europe

OVERVIEW OF REGIONAL MARKETS

Warsaw I

The Warsaw warehouse market split into two subzones accounts for 28.6% of the country’s total existing stock.

Warsaw I – the hub comprises warehouse and logistics space located within the capital’s administrative boundaries. In Q4 2016 it grew by 4,500 sqm, thus reaching a level of 655,700 sqm. Over the last three months of 2016 the vacancy rate fell significantly and it now stands at 8.5% as compared to 9.8% at the end of September. However, it continues to be one of the highest vacancy rates in the country. The considerable share of unleased space is not reflected in the rents, which remain at a consistently high level.

Warsaw II

The warehouse and logistics existing stock within the area covering a 50 kilometre radius from the capital stands at 2,543,000 sqm. The only scheme delivered in Q4 2016 was Panattoni BTS TNT Janki with the area of 15,900 sqm. Over the coming months the pace of growth for this particular market will be speeding up considerably due to the fact that at the moment there is more than 278,500 sqm under construction.

Q4 saw a high level of tenant interest in warehouse space. This is reflected in the vacancy rate, which over the last three months of 2016 fell by 1.4 percentage points and currently stands at 6.7%.

Upper Silesia

The Upper Silesia warehouse and logistics market grew in Q4 by 14,200 sqm, which was due to the delivery of the Segro Industrial Park Tychy II scheme. At the moment the total existing stock in the hub stands at 1,933,800 sqm. Further 288,600 sqm is currently under construction, which is the second highest result in Poland in terms of new supply. The vacancy rate did not change as compared to Q3 and at the end of 2016 stood at 5.7%.

Q4 saw developer interest in the towns of the Upper Silesia conurbation, which so far had not been seen as typical warehouse hubs. Additionally, new schemes are now appearing in more distant locations such as Bielsko Biała and Opole.

Poznań

Poznań is Poland’s third largest industrial and logistics market. At the end of 2016 the total existing stock in this region stood at nearly 1,663,000 sqm. No new schemes were delivered over the last quarter.

Despite the lack of new supply, the vacancy rate increased slightly as compared to Q3 from 8.3% to 8.6%. It is the highest vacancy rate amongst primary industrial and logistics hubs and the second highest result in Poland.

One of the risk factors that could inhibit the growth of the market in the future is one of the lowest unemployment rates in the country oscillating at around 2%. Nonetheless, developers are not disturbed by the relatively high vacancy rate or the potential difficulties in finding staff. Poznań is one of the 4 logistics hubs where the volume of space under construction at the end of 2016 exceeded the 200,000 sqm mark. The highest level of activity is recorded in the western part of the agglomeration in the vicinity of the motorway and the airport, which is where this industrial and logistics hub’s centre of gravity is now shifting to.

Wrocław

The Wrocław market owes its growth to the well-developed transport infrastructure and its proximity to the country’s southern and western borders. The total volume of supply within the hub increased in Q4 by more than 35,000 sqm and reached a level of 1,485,300 sqm. The two schemes delivered were the warehouse buildings within the Panattoni Park Wrocław IV (25,000 sqm) and Panattoni Park Wrocław VII (10,300 sqm) complexes. There are 87,000 sqm remaining under construction, with further schemes in the pipeline.

The vacancy rate fell by 0.6 percentage points as compared to the previous quarter and currently stands at 5.6%. This shows that there is undiminishing tenant interest in Wrocław’s warehouse market, which is additionally confirmed by the further planned extensions of other logistics parks.

Central Poland

In Q4,  with a total of 114,500 sqm delivered, Central Poland recorded the highest increase in Poland in terms of the volume of warehouse space, where the largest schemes completed included Hillwood Stryków (50,540 sqm) and the second building in the Prologis Park Piotrków II complex (42,200 sqm). Despite the considerable volume of new supply, the vacancy rate fell by 0.4 percentage points as compared to Q3 and currently stands at 2.7%. This shows that there is a high level of interest in this market. Additionally, over the past few months a significant shortage of warehouse space was recorded in Łódź itself.

The dominance of large format schemes within the hub means that rents remain at a stable low level. At the moment the cost of leasing 1 sqm in the area oscillates between €2.0/sqm and €3.1/sqm.

Tri-City

The industrial and logistics market in the Tri-City region grew in Q4 by approximately 21,000 sqm. With supply at a level of 394,400 sqm, this region is the largest developing hub, while there are further 35,700 sqm currently under construction.

The vacancy rate fell by 2.7 percentage points as compared to Q3 and currently stands at 5.5%.

A large volume of land has been secured within the hub by developers for construction of new industrial and logistics schemes, which could contribute to the market’s fast growth in the future.

Kraków

The total stock of industrial and logistics space in the Kraków region remained unchanged as compared to Q3 and at the end of 2016 stood at 284,800 sqm.

The vacancy rate increased by 3.4 percentage points and at the end of December reached a level of 9.8%. It is worth mentioning that only as far back as mid-2016 there was no available space in the Kraków area. These extensive fluctuations show that it is a shallow market. The increase in availability resulted in a slight decrease in asking rents, which currently stand at between €2.9 and €3.9 per sqm/month

Developer activity within the hub is mainly noticeable along the A4 motorway in locations such as Skawina and Kokotów, where at the moment there are 19,000 sqm of industrial and logistics space under construction.

Szczecin

Over the last three months of 2016 only the Szczecin industrial and logistics market grew by 6.5%, which was due to the delivery of 11,400 sqm within the Panattoni Park Szczecin I complex. The pace of growth will still increase over the coming years. There are currently 313,000 sqm of space under construction, where the dominant share is taken up by two BTS schemes: BTS Amazon Szczecin (161,000 sqm) and BTS Zalando (130,000 sqm). Following completion of only these two complexes, the Szczecin warehouse market will grow by more than 150%.

Due to the specific nature of BTS projects, the delivery of the above schemes will not significantly affect the vacancy rate (currently standing at 3.0%), or the rents, which range between €2.8 and €3.5 per sqm/month.

Lublin/Rzeszów

In Q4 the Lublin Rzeszów hub grew by 15,200 sqm due to the delivery of the second building within the Panattoni Park Lublin complex. Thus, the total supply of industrial and logistics space in South East Poland reached a level of 314,700 sqm.

4.3% of the above space remains vacant, where further 51,300 sqm are currently under construction.

Rents for warehouse space around Lublin and Rzeszów range between €3.2 and €3.3 per sqm/month.

Toruń / Bydgoszcz

At the end of 2016 the smallest hub reached a size of 151,400 sqm, out of which only 1.1% remained vacant. There are more than 129,000 sqm currently under construction. The majority of schemes being developed are BTS projects: BTS Kaufland (45,650 sqm) and BTS Carrefour (38,000 sqm). However, there are also other significant schemes under construction, i.e. Waimea Logistic Park Bydgoszcz, with delivery planned for the first half of 2017, and the third Panattoni Park Bydgoszcz building.

Rents remain stable and oscillate within a range of €2.4 and €3.1 per sqm/month.

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