The warehouse market in Poland is picking up again. There’s an increase in demand with a high share of renegotiations.
The total volume of lease transactions in the Polish warehouse market in H1 2024 amounted to 2.7 million square meters. The result largely relied on extensions, which accounted for approx. 40% of all contracts. Alongside the high demand, supply remains delicately tempered. From January to the end of June, developers maintained the ongoing market development dynamics at about +10% YOY (33.5 million square meters), which corresponded to the delivery of approx. 1.6 million sq. m. of modern production and logistics space. The moderate new supply, along with a rebound in demand, allowed for stabilization on the vacancy side, as well as in the initial rent rates. Poland’s largest advisory company in the commercial real estate market, AXI IMMO, presents its latest report “Polish warehouse market 1H 2024”.
Investments: The Market is Rebounding
As of end-June 2024, the investment market in Poland saw the warehouse sector accounting for €294 million (17% of the total value), which indicates a 33% drop compared to H1 2023. Of the 11 transactions concluded in H1, the biggest was the acquisition of Panattoni Park Poznan XI by EQT Exeter (129,400 sq.m.) in Q2. The second was the purchase of two neighboring parks, West Park Pruszkow and West Park Ożarow (totaling 81,900 sq.m.), by Hillwood from DWS/RREEF in Q1 2024.
Grzegorz Chmielak, Director of Valuations and Capital Markets, AXI IMMO comments: “Production and logistics assets are still of interest to investors, especially in the context of multi-tenant big box investments. Developers are increasingly opting to buy existing buildings due to high construction costs and difficulties in financing new projects. Even though investment activity has been low compared to prior years, the market is gradually reviving. The decline in inflationary pressures and a cut in interest rates by the ECB may stimulate transactions and spark the entry of new players into the Polish market. However, investors remain cautious, selectively picking projects and gearing up for bigger purchases next year”.
Demand: A Rebound, but with a High Share of Extensions
In the first six months of 2024, the total lease volume in the Polish warehouse market amounted to 2.7 million sq.m. (+23% YOY), with a 39% share of lease extensions. The score for renegotiations increased by 26% YOY. Meanwhile, 1.7 million square meters (+22% YOY) were signed solely under new contracts (net demand). The most active provinces were Lower Silesia (nearly 527,000 sq.m.), Masovia (506,000 sq.m.), and Silesia (469,000 sq.m.). The so-called “big five” continue to dominate the Polish warehouse market. In H1 2024, they collectively accounted for 81% of gross demand in the country. Among the largest lease transactions between January and June 2024, a new contract was signed by a company in the retail sector in Bydgoszcz Białe Błota LC in the Kuyavian-Pomeranian Voivodeship for 103,800 sq.m., and in Lower Silesia, a logistics operator opted to extend and expand the current contract in Prime Logistics Wrocław Pietrzykowice (98,700 sq.m.). The third was a new contract which resulted in a tenant from the e-commerce sector moving to Panattoni Wrocław Logistics South Hub occupying 91,000 sq.m.
Anna Głowacz, Director of the Industrial and Logistics Space Department, AXI IMMO points out: “Costs related to new warehouse projects are currently higher than those of existing buildings, this is due to an increase in overall investment costs, including construction costs that are higher compared to previous years. Furthermore, facing employment challenges, tenants prefer to stay in their current locations to maintain their existing workforce. Nevertheless, we have also observed a positive trend in the form of increasing leased space under both new contracts and expansions of existing operations”.
Supply: Developer Activity Returns to Normal
The delivery of 1.6 million sq.m. (-37% YOY) under new supplies by the end of June 2024 allowed for an increase in total resources of modern warehouse space to 33.5 million sq.m. (+10% YOY). The highest developers’ activity in H1 2024 was noted in Lower Silesia (423,000 sq.m.), Pomerania (239,000 sq.m.) and Mazovia (235,000 sq.m.). Among the largest delivered warehouse parks were, among others, CTPark Gdańsk Port (119,400 sq.m.), Panattoni Park Wrocław Logistics South Hub (90,000 sq.m.) and GLP Wrocław V Logistics Centre (86,200 sq.m.). As of end-June 2024, nearly 2 million sq.m. (-6.2% YOY) were under construction, with the most constructions taking place in Lower Silesia (568,000 sq.m.), Mazovia (410,000 sq.m.), and Łódź (322,000 sq.m.). About 45% of the currently executed new supply are speculative projects. Moderate developer activity, coupled with higher demand in H1 2024, led to stabilization of the vacancy rate at 8.3% (+1.6 p.p. YOY). The highest level of unleased space is found in the Lubuskie Voivodeship (19.3%), followed by the Świętokrzyskie Voivodeship (16.1%) and Łódź Voivodeship (10.8%).
Effective Rent Rates Decrease in Selected Regions
As of end-June 2024, average base rent rates remained stable in most locations. Owners’ expectations for big-box investments range from 3.6 to 5.5 EUR / sq.m. / month. The most attractive base rent rates, below 4.0 EUR / sq.m. / month, can be achieved in selected projects in Piotrków Trybunalski, Stryków, areas around Poznań and Warsaw. The highest base rent rates pertain to projects in the cities of Warsaw and Krakow, above 5.0 – 6.0 EUR / sq.m. / month. On selected highly competitive markets, a mild downward trend in effective rates is observed ranging from 15% to 25%. Meanwhile, in under-construction and planned projects, owners’ expectations are on average 10-15% higher than the offerings available in older buildings.
Renata Osiecka, Managing Partner, AXI IMMO, summarizes: “In H2 2024, the warehouse market in Poland will develop stably, despite weaker consumer recovery and declining production. The trend of lease extensions in current locations will continue, and customer development will be selective. By the end of 2024, we expect more optimism on the demand side. As for supply, we anticipate that developers will focus on pre-let projects, with a smaller share of speculative space. Meanwhile, on the investment market, ongoing due diligence processes suggest a higher number of transactions in the upcoming quarters”.
Source: https://managerplus.pl/rynek-magazynowy-w-polsce-rekordowy-popyt-w-i-pol-2024-r-56096
