The AXI IMMO advisory firm presents its report Polish Warehouse Market in Q3 2020.
Total modern warehouse stock in Poland exceeded 20m sqm in Q3, with a further 1.5m sqm currently underway despite the pandemic. Occupier activity was at the second highest level on record in Q3, reaching 1.22m sqm (+49% y/y). Overall, 3.5m sqm has been leased since the start of the year. Investor sentiment also remains robust, as testified by a record volume of transactions signed so far in 2020.
During the first nine months of 2020, investment transactions worth EUR 1.9bn were completed, with EUR 740m closed in Q3 alone. The Goodman CEE portfolio acquisition by the GLP Group, which closed in July following regulatory approvals, was the largest deal of Q3 (EUR 1bn, with 66% of assets located in Poland). In addition, Kajima Properties Europe and Savills Investment Management acquired two warehouses within Panattoni’s Central European Logistics HUB (145,000 sqm) while Elite Partners Capital bought BTS PepsiCo within P3 Mszczonów (58,500 sqm) for EUR 30 m.
„The shift in investor demand towards warehouses is very strong. As a result, the sector accounted for 48% of total investment into Polish commercial real estate since the start of the year. Logistics and industrial assets have become a primary investment target, which gives reasons for optimism despite the constraints created by the pandemic. At the same time, more limited supply of new product may lead to compression of yields on warehouse assets in the medium to long term”, says Renata Osiecka, Managing Partner, AXI IMMO.
Gross take-up reached 1.22 m sqm between July and September (+49% y/y), with Upper Silesia recording the highest level of activity (297.5k sqm), followed by Warsaw (253k sqm) and Lower Silesia (147k sqm). A total of 3.5 m sqm of modern logistics and industrial space has been leased since the start of the year, led by Warsaw (871,000 sqm), followed by Upper Silesia (689,000 sqm), Central Poland (491,000 sqm), Poznań (373,000 sqm) and Lower Silesia (325,000 sqm).
Logistics firms accounted for the highest share of take-up in the last three quarters (32.9%), followed by retail chains (16.3%), e-commerce (12.3%), production firms (7.8%) and the electronics/white goods sector (7.5%).
Development activity reached 641k sqm between July and September (-36.3% y/y), allowing total stock to break through the 20 m sqm barrier. The size of the Polish warehouse market now stands at 20.2m sqm, which marks a 12.6% y/y increase. The largest amount of space was delivered in the first nine months of 2020 in the Warsaw region (419k sqm), followed by Upper Silesia (414k sqm) and Lower Silesia (316k sqm). There is currently 1.56m sqm of logistics and industrial space underway nationwide (-15.5% y/y), of which 373k sqm is in Upper Silesia and 343k sqm in Warsaw. The third highest pipeline is currently in the Western Poland market, due to the start of construction on the 200,000 sqm BTS facility for a large e-commerce player in Q3 in Świebodzin. The largest schemes delivered to the market in Q3 2020 are Hillwood Oleśnica (52,975 sqm), Panattoni Bielsko-Biała III (41,798 sqm), Panattoni Sosnowiec II (30,000 sqm), Hillwood Gliwice Sośnica (27,792 sqm), Panattoni Gdańsk South II (26,431 sqm) and an extension of MLP Pruszków II (26,220 sqm).
„The Covid-19 pandemic contributed to a drop in the number of speculative development projects. Developers are more cautious compared to previous quarters due to an uncertain market situation as well as tighter financing conditions, including a requirement by banks to pre-let approx. 50% of a planned scheme. As a result, the share of space built on a speculative basis fell as the end of September to 26.3%, from almost 50% at the end of 2019” says Anna Głowacz, Head of Industrial and Logistics Agency, AXI IMMO.
The vacancy rate increased to 8% at the end of Q3 2020 (+150 bps y/y). The highest availability of space in relation to the size of the market was recorded in Upper Silesia (10.3%) and Central Poland (9.3%) and the lowest – in Szczecin (0.6%) and Eastern Poland (1.1%). Availability increased as a result of completion of a number of speculative development projects that commenced at the beginning of the year.
This has had a limited impact on rents, with the majority of markets seeing stable rental levels. The average headline rents in big box schemes ranged between EUR 3.2 and EUR 3.6 /sqm/month, while effective rents, which reflect incentives offered by developers, remained approx.. 20-30% lower, at EUR 2.4 – 2.7 /sqm/month.
„We expect a significant increase in short-term leases, pre-lets and BTS contracts in the last three months of 2020. This should ensure that 2020 is a record year in terms of leased warehouse space, ahead of 4m sqm recorded in 2019. Demand will be generated predominantly by FMCG and e-commerce players. Higher take-up will be combined with lower supply on the back of limited availability of financing for speculative schemes. This will result in lower vacancy in the medium to long term, which should in turn generate upward pressure on rents, especially for last mile projects in large cities” summarises Anna Głowacz.
AXI IMMO offers consulting services in the field of commercial real estate. As part of the offer, the company provides B2B and B2C chain management services. The company conducts market analyses and provides reports on the commercial real estate market.
AXI IMMO’s greatest asset is the combination of international service standards with reliable knowledge of the local market. The company was awarded the title of the best Local Agency of the Year in 2012-2019 in the prestigious CiJ Awards competition organized by the CEE CiJ Journal magazine. It also received the award for the Best Team in the warehouse sector in 2016-2017. As part of the international partnership, AXI IMMO belongs to the Gerald EVE International and IRELS associations, and the employees are members of the SIOR and RICS association. AXI IMMO He is also a member of the PINK association – Polish Chamber of Commercial Real Estate.
Also read the newer Report: Polish Warehouse Market in Q1 2021.