As per the latest report of the international advisory agency Cushman & Wakefield, 2023 marked the second-best result in the history of the warehouse market in Poland in terms of the area put into use and the third in terms of tenant activity level. The sector’s foundations remain sturdy, which should guarantee its stable development despite rapidly changing macroeconomic conditions.
DEMAND: A CLEAR INCREASE IN THE ACTIVITY OF TENANTS IN THE SECOND HALF OF 2023
The challenging macroeconomic situation resulted in a correction in the demand for warehouse space, particularly noticeable against the record results from 2021-2022. However, 2023 ended with one of the best results in the market’s history.
Last year, tenant activity amounted to nearly 5.6 million square meters, marking the third-highest level in history. Net demand for new contracts and expansions accounted for 60% of the transaction volume, and the remaining 40% were contract renegotiations. The increase in activity in the second half of 2023, signaling an improvement in tenant sentiment, is particularly good news. From July to December, around 3.4 million square meters were rented, over 50% more compared to the previous six months, comments Damian Kołata, Partner, Head of Industrial & Logistics Agency Poland, Head of E-Commerce CEE, Cushman & Wakefield.
In the sectoral approach, logistics and courier companies maintained a strong market position with a 35% share of all 2023 transactions. The retail sector, along with e-commerce companies, accounted for about 25% of the total demand, the same as the manufacturing sector, including automotive.
In the era of global turbulence, all forecasts and assumptions carry relatively high risk. The industrial space sector has been recording double-digit growth rates for 10 years, which may slightly slow down in the next decade. It is worth emphasizing that the market is developing based on the strong foundations of the Polish economy and global trends related to the further development of the e-commerce industry, the reorganization of supply chains, and energy transformation, which is a good prognosis for the future, adds Damian Kołata.
SUPPLY: INCREASE IN WAREHOUSE SPACE AVAILABILITY IN 2023
In December 2023, the total warehouse space resources in Poland amounted to 31.71 million square meters, marking a 13% year-over-year increase.
In the fourth quarter, developers delivered 580,000 square meters of new space to the market, and since the beginning of the year, 3.7 million square meters. This result is the second-best in the sector’s history in Poland. The high level of supply contributed to an increase in warehouse space availability, which totaled 2.3 million square meters at the end of the year, twice as much as the previous year, comments Adrian Semaan, Market Analyst, Cushman & Wakefield.
Cushman & Wakefield data show that between 2021-2023, developers completed the construction of as much as 11.2 million square meters of modern space, which represents 35% of the total warehouse resources in Poland. In the last quarter of the previous year, development companies started the implementation of 822,000 square meters, indicating a healthy level of construction activity. At the end of December, a total of 2.8 million square meters were under construction, out of which 50% were speculative projects.
In 2024, the market resources should significantly exceed the level of 34 million square meters, and the Warsaw market will consolidate its leadership position, coming close to the 7 million square meters and thus increasing its lead to 20% over the second-place Silesian market. The Lower Silesian and Łódź markets are soon expected to reach the level of 5 million square meters, adds Adrian Semaan.
RENT AND VACANCY RATE STABLE
After months of growth, the vacant space index stabilized at 7.4%, marking a small quarterly decrease of 0.4 pp. The available space level in the Warsaw and Poznań regions remains stable and balanced. On the other hand, a temporary oversupply is visible on the Łódź market, where the index has decreased in recent months, but still exceeds 10%, as well as on the Wrocław market, where a significant volume of speculative investment is emerging. A downward trend in the vacancy rate is observed in Silesia (6.1%), and its lowest level was recorded in Małopolska (2.2%), the Pomeranian region (1.7%), and Podkarpackie (1.7%).
Rents for warehouse space in the fourth quarter of 2023 remained stable. Developers’ willingness to negotiate rates is limited, among other things, due to the cost of financing development investments. Temporary minor adjustments are only possible on selected markets, where there is significant competition between developers.
The still healthy dynamics of demand and supply stabilizes rent rates, helped by decreasing inflationary pressure and predictable construction costs. It is worth noting that in the second half of the year, developers limited the volume of speculative investments, launching 580,000 square meters of unsecured lease agreement projects, 40% less than in the first half of the year. This should result in the compression of the average vacancy rate by the end of the current year, summarizes Damian Kołata.
