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Polish Industrial-Logistics Market Shows Resilience Despite Challenges: Key Trends in 2023

REAL ESTATEPolish Industrial-Logistics Market Shows Resilience Despite Challenges: Key Trends in 2023

Despite significant changes in economic conditions in recent months, the industrial-logistics space market is in very good condition. By the end of December 2023, its resources exceeded 31 million square meters. Last year, developers began building over 3.2 million sqm of new space, of which about 2.8 million sqm still remain under construction- according to data from consulting firm Colliers.

2023 brought a revival and increase in supply

In terms of supply, the market leaders in 2023 were the Mazowieckie (6.3 million sq m), Śląskie (5.5 million sq m), and Łódzkie (4.5 million sq m) provinces. Mazowieckie and Śląskie also dominate the market in terms of new supply – 690,000 and 590,000 sqm were delivered here, respectively. Right behind them is the Lubuskie province with 437,000 sqm of new space.

Among the most significant warehouse objects built in 2023, stands out the Panattoni BTS building built for Zalando in Bydgoszcz with an area of 146,000 sqm, the successive stages of CTPark Iłowa offering 131,000 sqm, and the first stage of Panattoni Park Wrocław Logistics South Hub with an area of 125,000 sqm.

“We experienced significant changes in the construction market in 2022 due to the war in Ukraine, which reflected in the lower availability of general contractors, higher material costs, an extension of project completion times, and fewer new investments being started by developers,” explains Maciej Chmielewski, Senior Partner, Department of Logistics and Industrial space at Colliers. “2023 brought a significant improvement in the market situation. Construction costs fell, the availability of general contractors increased, and the implementation time shortened to an average of nine months (after obtaining all the necessary permits to start construction). Developers thus returned to greater activity, which resulted in a quarterly increase in the volume of space under construction in the second half of the last year. The implementation of some projects, whose construction began at the beginning of 2022 but had to be suspended due to an uncertain economic situation, was resumed at the end of 2023 and will soon also replenish the market resources”- adds the expert.

In 2023, developers began building 3.2 million sqm, of which about 40% were speculative objects. Records of the volume of space under construction in 2023 fell in the provinces: Lower Silesia (832,000 sq m), Mazowieckie (475,000 sq m), and Łódzkie (402,000 sq m). In total, at the end of 2023, 2.8 million sqm remained under construction.

Demand and rental rates – increases despite market challenges

Persistent interest of tenants in industrial-logistics spaces reflected in a relatively high gross demand, amounting to 5.7 million sqm.

“Although the first two quarters of the year were characterized by the lowest volume in the last four years, significantly higher tenant activity was recorded in the second half of the year. It resulted in a decrease of about 15% year on year, despite forecasts from June of the last year indicating a drop of about 40%. In the fourth quarter, the demand volume was the third highest result in the market’s history. We can expect demand stability in the industrial-logistics space market in 2024”, explains Dominika Jędrak, Director of the Consulting and Market Research Department at Colliers.

Mazowieckie province achieved the highest volume of rented space (1.5 million sq m). Lower Silesia with 1 million sq m and Śląskie province with 915,000 sq m also maintained a strong market position. Increases and decreases in demand differed depending on the region – while Lubuskie experienced a significant decline, West-Pomerania and Pomeranian recorded impressive increases of 70% and 60% respectively.

The past year also saw a change in the structure of lease agreements. New contracts accounted for 51% of demand, while the proportion of renegotiations increased to 40%, compared to 59% and 34% in the previous year. Among the tenant industries, the 3PL sector maintained its leading position, having a 34% market share. Immediately after it, e-commerce with 12% and trade with 11%.

Rental rates increased significantly, caused by higher fuel, building materials, and financing costs. They still continue to rise, although this increase is gentler than last year. Traditionally, the highest rates were registered in Warsaw, where the base amount started from 4.40 EUR/m²/month, and the highest exceeded 6.95 EUR/m²/month. Effective rates in the capital oscillated between 4.00 and 6.10 EUR/m²/month. On other regional markets, base rates ranged from 3.40 to 5.90 EUR/m²/month, and effective rates ranged from 2.80 to 5.20 EUR/m²/month.

Availability and Vacancy Dynamics

The vacancy rate increased to 7.3% by the end of December 2023 (up 3.3 percentage points from the previous year). This is a result of the significant volume of new supply introduced to the market in recent years, of which as much as 65% are objects built in 2022 and 2023. Higher vacancy rates in newly opened facilities may therefore indicate that the absorption of new warehouse space requires more time than expected. The highest vacancy rates were recorded in Świętokrzyskie, Lubuskie, and Łódzkie provinces – 18.5%, 14.4%, and 10.2% respectively. The lowest percentage of vacancies was recorded in the Pomeranian (1.5%), Subcarpathian (1.7%), and Lesser Polish (2.1%) provinces.

Attractive Investments

Poland is already the second-largest producer of batteries for electric cars, and planned investments such as the battery elements factory in Nysa by Umicore and PowerCo from the Volkswagen Group or the commencement of battery production by the Polish company Impact Clean Power Technology in Pruszków, strengthen this position. However, despite this optimistic outlook, the warehouse market may also experience slight pressure on rents due to the relatively high availability of space in existing facilities. This may lead to a slowdown in the growth trend and, in some cases, even rent reductions.

A crucial factor for the development of the industrial-logistics market remains transport infrastructure, with Polish maritime transport currently in a dynamic growth phase. The construction of a deep-water berth at the BalticHub container terminal in Gdańsk or the expansion of the port in Świnoujście, as well as the planned modernization of the port in Elbląg, can significantly contribute to increasing the attractiveness and logistics accessibility, especially for the Warmia-Mazury province. Air transport is also developing in parallel, with new cargo terminals in Kraków-Balice and Lublin currently being built, the announced construction of a new cargo terminal at Katowice Airport, and the renovation of the runway at Rzeszów-Jasionka Airport.

Among the significant market trends, there is also a significant increase in popularity of facilities offering green solutions, confirmed by certificates.

“More often, new industrial and logistics spaces are being developed in accordance with ESG assumptions. It’s no longer a trend, but a market standard, beneficial not only in terms of image, but also financially. This is also reflected in the levels of certificates awarded to buildings being built in Poland “- explains Antoni Szwech, Senior Analyst in the Consulting and Market Research Department at Colliers.

In 2023, Panattoni Park Szczecin III was the first industrial-logistics project in Poland to receive the BREEAM certificate at the highest Outstanding level, and shortly afterwards, this award was given to three other Polish parks. More facilities are waiting in line for recognition.

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