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Warehouse Market Poised for a Change as Demand Eases and Supply Grows

REAL ESTATEWarehouse Market Poised for a Change as Demand Eases and Supply Grows

By the end of September 2023, the warehouse market supply had reached 31.1 million sq. m., increasing by 13.4% over the year. Despite this, both developers in the case of new supply and tenants in demand recorded worse results compared to previous periods under study.

The warehouse market has been developing dynamically in recent years. The primary factors for this success include Poland’s central location in Central and Eastern Europe, a still competitive salary compared to other countries, and investment incentives for potential investors. Warehouse resources in Poland at the end of the third quarter of 2023 were estimated at 31.1 million sq. m., which represents a volume increase of 13.4% just in the past year.

“Analyzing the main areas of concentration of modern warehouse space, one should first point out 8 markets: Warsaw and its surroundings, Upper Silesia, Central Poland, Greater Poland, Lower Silesia, Szczecin, Tricity, and Kraków. The development of road and rail infrastructure has influenced the decisions of developers who are expanding the scope of their investments to locations like Rzeszów, Kielce, and Lublin. Also, there is a visible interest in smaller warehouse centers, such as Kujawy or western Poland, bordering Germany,” – says Szymon Sobiecki, a consultant in the market research department at Knight Frank.

From January to September 2023, developers delivered over 3.1 million sq. m. to the warehouse market, with the largest share of new supply falling in the first quarter of 2023. For comparison, in the third quarter of 2023 alone, warehouse projects covering nearly 530,000 sq. m. were completed. The largest warehouse facilities that were granted use permission in the first nine months were: Panattoni BTS Zalando Bydgoszcz (146,000 sq. m.), Panattoni Park Wrocław Logistics South Hub (125,000 sq. m.), and Hillwood Łódź II (97,000 sq. m.).

“Developers’ activity in terms of supply in construction noted almost 40% drop compared to last year. At the end of September 2023, 2.5 million sq. m. were still being implemented, a result similar to those noted before the outbreak of the pandemic. A positive signal for the market is that almost half of the area under construction is already secured by the lease agreements. Another good news is the size of investments started in the third quarter, which were estimated at 890,000 sq. m., an increase of nearly 220,000 sq. m. compared to the previous quarter. Most of the implemented investments were registered in the Wrocław concentration area – 450,000 sq. m.,” – adds Szymon Sobiecki.

Among the largest investments under construction, DL Invest Psary (120,000 sq. m.), GLP Wrocław V Logistic Centre (86,200 sq. m.), and another warehouse hall in the Panattoni Park Wrocław Logistics South HUB complex (90,000 sq. m.) stood out.

“In the first three quarters of 2023, tenants signed contracts for over 3.75 million sq. m. of warehouse space, a result nearly 30% lower compared to the same period last year. The most popular among companies were three developed concentration areas, i.e., Warsaw, Upper and Lower Silesia, where the share of transactions in the total volume was estimated at 56%,” – explains Przemysław Jankowski, Director of the Warehouse and Industrial Property Rental Department at Knight Frank.

Among the most critical transactions concluded from the first to the third quarter of 2023 were: a new agreement signed in the DL Invest Psary logistics park, where a logistics sector tenant will occupy 120,000 sq. m., a new contract in CTPark Warsaw West in the suburban Wiskitki, where the logistics company Raben rented a total area of 110,000 sq. m., and an expansion agreement for 86,000 sq. m. of warehouse space in the GLP Wrocław V Logistics Centre park.

New contracts constituted the largest share in the demand structure – 53%. Renegotiations accounted for 35% of the volume, and expansions for the remaining 12% of signed agreements.

Poorer results on the demand side led to a 3.7 pp. increase in the vacancy rate compared to the same period in 2023. By the end of September 2023, the rate had reached 7.8%.

Starting rents in all analyzed regions remained stable compared to the previous quarter.

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