Last year, the warehouse space market witnessed an 8 per cent increase in vacancies. This significant rise can be traced back to the record-high activity of developers in the preceding two years. Thus, JLL experts anticipate a decrease in new investments this year. Pairing a reasonably stable demand from tenants, these changes are expected to bring the warehouse space market back into balance and halt the ongoing increase in rents.
“In 2023, the warehouse space market went through rising interest rates, which led to decompression of capitalisation rates, significantly impacting the behaviour of players in the warehouse market. Nonetheless, developers remained very active in implementing new investments,” Tomasz Mika, Director of Warehouse and Industrial Space at JLL, told Newseria Biznes. “This resulted in an increasing rate of unleased space, which reached almost 8 per cent by the end of 2023. During the same period, warehouse tenants also remained active, and we expect the outcome to be around 4.5 million square meters.”
According to JLL’s experts, the demand will remain stable in 2024 and will sustain a similar or slightly increased level of 4-5 million square meters of space. The continuous growth of top players and the new demand from companies entering the market are some of the factors contributing to this trend. Foreign investments and expanding support for them, raising the demand for production and logistics space, are also significant drivers.
“We predict that logistics operators will primarily stay active. We also hope to see a higher number of production investments, whether due to the relocation of production plants from Asia or production diversification by global companies. We hope Poland will benefit from this trend,” Mika said.
Poland remains one of the most attractive industrial locations in Europe. Companies from the Old Continent, learning from their experiences during the pandemic, the ongoing war east of the border, and disruption in global transport routes, are adapting their supply chain strategies. This strategic shift includes promoting local manufacturers, diversifying suppliers and sources of supply, and spreading out stores or warehouses. As a result, companies reduce fuel consumption and their carbon footprint, as well as the demand for drivers, one of the most sought-after professions in the market. As JLL experts emphasise, comprehensive reorganisation of the distribution network, implying a dispersion of warehouses, can reduce transportation-related costs by up to 40-50 per cent.
Mika added: “Developers constructing new warehouse spaces and tenants have focused primarily on the largest warehouse markets in Poland, known as the ‘big five.’ Over 75 per cent of modern warehouses are concentrated in these areas, and we expect this trend to continue. However, smaller but stabilised markets such as Szczecin, Tricity, or Krakow should also attract significant market interest.”
On the supply side, experts predict a gentle slowdown of investments in the construction market, especially speculative ones. The rise in the index of unleased space last year influences this trend. The average share of vacant spaces in the total existing space in Poland approached 8 per cent, increasing by almost 3 percentage points in merely a year. The reason is the developers’ record activities in 2021-2022, with nearly 5 million square meters under construction.
“By the end of 2023, almost 3 million square metres of new warehouse spaces were under construction. We predict that these will be put into operation this year, but the number of new investments will likely decrease due to the high rate of unleased space,” said Mika.
The developers’ response will prevent oversupply in the market, as the unleased space will gradually become occupied by future tenants. This restoration of market balance should also lead to stabilised rent rates.
“2022 brought the largest increase in rents in the history of the Polish warehouse market, with rates rising by 22 per cent. In 2023 the trend continued, albeit at a much slower pace, with rents increasing by another 5 per cent. At present, we expect this trend to slow down due to the large number of available spaces and high vacancy rate, which should naturally limit any further increase in rent due to competition among property owners offering warehouse spaces,” the JLL expert forecasts.
