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Łódź Warehouse Market: Strong Foundations and Room for Growth

REAL ESTATEŁódź Warehouse Market: Strong Foundations and Room for Growth

For years, the Łódź Voivodeship has been an attractive location for developers due to its strategic position and well-developed road infrastructure. Projects here are characterized by large individual volumes, exceeding 30,000 sqm, which is 15% above the national average. On the demand side, logistics, trade, and manufacturing have accounted for over 75% of leases in the region in recent years. Despite challenges related to vacancies (10.2%, +4.8 pp y/y), developers maintain a high pace of new project construction, reaching 397,000 sqm (+13% y/y) by the end of Q1 2024. Although a decline in new investments is anticipated, the market remains stable, offering attractive development opportunities for investors. Poland’s largest commercial real estate advisory firm presents a special publication titled “In the Spotlight: Analysis of the Warehouse-Production Market in Łódź Voivodeship.”

The warehouse market in the Łódź Voivodeship is the third-largest industrial-logistics region in Poland, after the Mazowieckie and Śląskie Voivodeships. At the end of 2023, the total supply of modern warehouse space in the region amounted to 4.5 million sqm, representing 14% of the country’s supply. Over the past five years, the market in the Łódź Voivodeship has grown by 74%, with the most significant increases recorded in 2019 and 2022. Notable locations in the region, such as Łódź Widzew, Stryków, and Piotrków Trybunalski, have seen dynamic development of new submarkets in recent years, including areas near the Łódź motorway bypass, such as Konstantynów Łódzki, Zgierz, and Pabianice, as well as micro-markets scattered throughout the voivodeship, such as Łowicz, Kutno, Rawa Mazowiecka, and Koluszki. Data for Q1 2024 shows that only one project of 26,600 sqm was completed, slightly increasing the region’s total supply. The most active developers in the region are Hillwood, Panattoni, 7R, and MDC2. Among the largest investments completed in 2023 were Hillwood Łódź II Chocianowice (97,000 sqm), Hillwood Rawa Mazowiecka (78,000 sqm), and 7R Park Łódź East (nearly 47,000 sqm).

Monika Rykowska, Director of Market Analysis and Marketing at AXI IMMO, comments: “In the last three years, over 435,000 sqm of modern warehouse space has been delivered annually in the region, with a record 650,000 sqm in 2022. In 2023, the market grew by another 415,000 sqm, with over 70% built on a speculative basis. Last year, most new space was delivered in Łódź and its surroundings, accounting for over 60% of the new supply in the voivodeship.”

At the end of March 2024, 397,000 sqm was under construction, with 65% being speculative space. It is worth noting that all projects started in 2023. In the first months of 2024, no new construction was initiated by developers in the region. Major investments expected to be completed by the end of the year include Hillwood Zgierz II (77,000 sqm), MDC2 Park Łódź South (52,000 sqm), and Panattoni Park Łódź West II (51.2,000 sqm).

In the past five years, the highest gross demand indicators (including new leases, expansions, and renewals) were recorded between 2019 and 2022, with an average annual total tenant activity of 749,000 sqm, peaking at 835,000 sqm in 2022. Notably, new lease agreements accounted for an average of over 63% of transactions in that period. However, the economic slowdown in 2023 affected overall tenant activity, with 606,000 sqm leased last year (-27% y/y), while new leases and expansions (net demand) totaled 303,000 sqm, a 44% year-over-year decline. The first quarter of 2024 closed with a gross demand of approximately 180,000 sqm, comparable to Q1 of the previous year. Significant recent transactions include a new lease for 62,000 sqm by a confidential retail tenant at Hillwood Łódź II in Q1 2024, Leroy Merlin’s extension and expansion of 50,200 sqm at Logicor Stryków in Q3 2023, and InPost’s renewal of 43,700 sqm at P3 Piotrków in Q4 2023.

Hubert Wojtera, Director of Industrial and Logistics Space at AXI IMMO, says: “In terms of demand structure, logistics tenants and distributors dominate all submarkets, particularly in Stryków and Piotrków Trybunalski, where 3PL operators and trade occupy over 80% of warehouse space. Łódź and its surroundings are more diverse, with the majority of manufacturing tenants located within the city.”

At the end of 2023, the vacancy rate in the Łódź Voivodeship was 10.2% (+4.8 pp y/y), the highest among the five largest warehouse markets in Poland. In absolute numbers, this translated to over 300,000 sqm of available space. The vacancy rate remained similar in the first months of 2024 and is expected to show a slight downward trend in the coming quarters.

Average rental rates in the Łódź Voivodeship ranged from 3.5 to 4.6 EUR per sqm per month, with Piotrków Trybunalski being the cheapest location (3.2 to 3.6 EUR/sqm/month) and Łódź-city the most expensive (4.1 to 4.6 EUR/sqm/month) for big-box investments. Similar to other markets, effective rates are 15-25% lower on average, depending on the competitiveness of the offered properties, module size, and lease term. The attractiveness of the Łódź Voivodeship remains high, as it is one of the most competitive regions in the country, even compared to low-cost areas such as those within 50-60 km of Warsaw, around Poznań, or selected locations in Upper Silesia.

Hubert Wojtera concludes: “The warehouse sector in Poland and the Łódź Voivodeship shows solid foundations. However, the global economic slowdown and rising operational costs will influence clients’ attitudes towards investments in 2024. The long-term perspective indicates further tenant development, especially in the trade and distribution segments. We forecast reduced developer activity, which should result in a downward trend in vacancies. Rental rates will remain stable, with a slight downward trend in some locations.”

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