Report: Warehouse market in the first half of 2019, Poland

The warehouse sector has another successful six months behind it. High, stable demand at 1.8 million square metres was the result of high activity in the logistics sector. On the supply side, developers are building without pause and are not afraid to invest in speculative projects. In the first six months of this year, nearly 1 million sq m were delivered on the market and further 2.3 million sq m were under construction at the end of June. These are the main conclusions from the latest report “Warehouse market in the first half of 2019, Poland” prepared by the consulting company AXI IMMO.

Demand: Large transactions for the logistic sector fuel demand

From January to the end of June 2019, more than 1.8 million sq m were leased, of which new lease agreements accounted for 66%. Although this result is 18% lower compared to the first half of 2018, no signs of a slowdown in the sector are visible yet. Stable demand is the effect of still high internal consumption, including further increases related to e-commerce.

The best results were achieved by the five main warehouse and production hubs, which accounted for 89% of demand in the first half-year. The most space was leased in the Warsaw region (550,000 sq m). This result is 70% higher compared to the same period last year. Besides, that is the result of several large logistics investments and an increase in the number of contracts related to last-mile logistics in the cities. Lower Silesia came in second with over 330,000 sq m of leased warehouse space. Then Central Poland and Upper Silesia with a demand of 300,000 sq m in each of these regions.

It is worth noting the very good result of Lower Silesia, where the high activity of companies already present in the region as well as new entrants is visible. Over 90% of contracts were new lease agreements. Lower Silesia has many advantages that favour the development of the sector. These include: convenient location for international distribution, the availability of land, quite strong industry and the absorbent consumer market in Wroclaw – explains Anna Głowacz, Head of Industrial at AXI IMMO.

In the last six months, we observed high activity among logistics operators, who rented the most space to service large contracts. Their share in the demand structure was 46%. Retail chains and production companies were in second place with a share of 11.5% and 11%, respectively.

Supply: High over 50% share of speculative projects

Total supply of modern warehouse space at the end of June this year amounted to over 16.8 million sq m. Developer activity is at a high level, with 1 million square metres delivered on the market since the beginning of the year, which is 65% more compared to the same period last year. The high half-year result on the supply side is the result of numerous investments started in the last quarter of last year.

Most new space, over 220,000 sq m, was delivered in Central Poland. Followed by over 125,000 sq m, in Warsaw and in Lower Silesia. Eastern Poland and Szczecin stood out among the new markets, where in total over 235,000 sq m were commissioned.

The forecast presented by AXI IMMO’s experts in Q12019 report came true, as a result of high development activity, the total stock of warehouse space in Central Poland exceeded supply in Upper Silesia.

According to an analysis carried out by AXI IMMO experts, 2.3 million square metres of warehouse space was under construction at the end of June. Upper Silesia remains the largest construction site, where developers within 14 investments are building 587,000 sq m, of which 210,000 sq m are in the BTS project for Amazon in Gliwice. Next are Central Poland (471,000 sq m), the Warsaw region and Upper Silesia, where over 420,000 sq m of modern warehouse space are being built in each of these regions.

The high number of investments under construction is also the result of speculative investments, whose share at the end of June this year was over 50%. This is an increase of 22% compared to the end of the first quarter of this year. In most cases, developers, after signing the first pre-let agreement, begin construction with a large speculative component – comments Anna Głowacz.

Vacancy rate: The main markets with the highest space availability

At the end of June 2019, the average vacancy rate was 5.0%, which means an increase of 0.3 of a percentage point compared to the vacancy rate at the end of March this year. The highest increases in vacancy rates during the second quarter were in Central Poland, where at the end of June this year 9.2% of the region’s stock was immediately available. In addition, more than 7% was available in Poznan (7.6%) and in Upper Silesia (7.5%).

Headline rents still with an upward trend  

Rental rates in most warehouse locations in the past six months showed a further slight upward trend, especially in terms of headline rents, both in the main markets and in newly opened projects. Average rents for logistics space ranged from 2.8 to 3.7 euros per square metre, while for city investments they even reached 5.4 euros per metre. The best chance of obtaining attractive effective rents still exist in the Warsaw and Poznan regions.

Forecast: Total stock with more than 18 mln sq m at the end of the year

The warehouse market will remain in good shape in the second half of the year. At the end of the year, the total stock of modern warehouse space in Poland will reach 18 million square metres.  Demand should remain stable and at least 3.5 million square metres should have been leased by the end of 2019. The trend of adapting supply chains for e-commerce will continue.

In terms of warehouse space available, we can expect a periodic increase in availability due to the commissioning of speculative projects and the relocation of logistics companies, especially in Central Poland and Upper Silesia. Rental rates will remain stable up to the end of the year, especially in the main markets, where high competition among developers persists.

See our report for the Q1 2019 on the commercial warehouse market in Poland https://en.axiimmo.com/publication/a-change-is-coming-to-the-largest-warehouse-markets-in-poland.