Warehouse market is booming, developers go for new locations

Raport AAG Q1 2018

Warehouse market is booming, developers go for new locations

Poland’s warehouse and logistics market is truly booming at the moment. Only last year, the total volume of modern warehouse space increased by 21%. The data for the first three months of 2018 shows that the market is not slowing down.

One record after another

Q1 was all about breaking records. The vacancy rate reached a record breaking low of 4.9%, which was partially due to a historically strong demand. Only between January and March this year, an approximate 1.2 million sqm of warehouse space were leased. The extremely favourable conditions encourage further development, thus leading to a hitherto unseen volume of space under construction which stands at nearly 1.9 million sqm

Katarzyna Pyś – Fabiańczyk, Dyrektor Działu Powierzchni Przemysłowych i Logistycznych, Europa Środkowo – Wschodnia, BNP Paribas Real Estate Poland

New supply

In terms of space completed and delivered to the market, Central Poland was the leading region in Q1 with an increase by 212 900 sqm, which represents 54% of new supply for the entire country. The largest schemes completed and delivered to the market were a build-to-suit warehouse for B/S/H (79 000 sqm) and P3 Piotrków (62 200 sqm). Both of the schemes are located in Central Poland.

Space under construction

An analysis of the geographical distribution of the volume of space currently under construction shows that developers in Upper Silesia and Central Poland are the busiest. Respective 419 000 sqm and 360 200 sqm of space under construction were recorded there. The second largest region in terms of volume of projects under development is Western Poland stretching along the border with Germany and the S3 express road which is under construction itself. At the same time, this is the most dynamically growing location for warehouse and logistics schemes. At the moment, a total of 230 900 sqm are under construction there, which accounts for as much as 86% of the space to be found in existing schemes

Patrycja Dzikowska, Head of Research and Consultancy, Central and Eastern Europe, BNP Paribas Real Estate Poland

Vacant space

Invariably, the highest vacancy rate was recorded in Warsaw I zone, which comprises warehouse and logistics properties located within Warsaw’s administrative boundaries. At the end of Q1, vacancy rate there stood at 8.9%.

As far as the key warehouse markets are concerned, Central Poland has the smallest volume of available space (1.9%), with fully leased build-to-suit schemes holding a large share in the stock on the market. Some of the less developed markets have an even smaller volume of available space, where at the end of March regions such as Bydgoszcz/Toruń, Szczecin and Western Poland had virtually no available warehouse space in existing properties. The main reasons for this are the dominant position of the build-to-suit format and the strong demand from tenants supported by relatively high availability of workforce observed in the above regions.

What next?

The warehouse and logistics sector players and observers are now asking the question as to which direction the market growth is going to go in next.

Increasing labour and building materials costs will continue to affect the industry the most in the nearest future. This will translate into increasing development costs, and, indirectly, into higher rents. Unflagging demand and increasing costs will lead to developers becoming less willing to offer tenants rent incentives. As a result, the gap between base and effective rents will start to decrease gradually. Furthermore, there is also a visible trend where warehouses are being developed in new locations now.

Katarzyna Pyś – Fabiańczyk, Head of Industrial & Logistics Department, Central and Eastern Europe, BNP Paribas Real Estate Poland

New locations

For warehouse space occupiers one of the key criteria in selecting a given location is availability of sufficient workforce in the region. As a consequence of the increasingly pressing problem with finding staff, in particular in the vicinity of large urban centres, developers elect to locate their properties in regions hitherto not associated with warehouse schemes. In addition to the availability of the necessary workforce, suitable transport infrastructure is a condition precedent for a scheme to operate effectively.

Construction of new sections of express roads and motorways is now becoming the key that opens growth opportunities in new locations. There are specific examples that can be given here. Construction of a section of the S8 road linking Warsaw to Białystok has already contributed to erection of warehouse schemes such as Panattoni Park Radzymin and Panattoni Park Białystok. In turn, expansion of the S7 road between Warsaw and the Tricity and construction of its branch (S51) leading to Olsztyn were the foundations used by Hillwood to develop an e-commerce Zalando logistics centre near Olsztynek. In a similar fashion, the S3 road in the west of the country is also attracting numerous build-to-suit schemes, which frequently are relocations from Germany. We expect that further development of our transport infrastructure will lead to the “launching” of new locations attractive to developers.

John Palmer, Director, Capital Markets, Industrial Investments & Valuation CEE, BNP Paribas Real Estate Poland

More details available in the report entitled: At a Glance, POLAND’S INDUSTRIAL AND WAREHOUSE MARKET Q1 2018.

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John Palmer

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Patrycja Dzikowska

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Katarzyna Pyś-Fabiańczyk

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