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The Warsaw Voice » Real Estate » September 30, 2009
Modern Warehousing Centers
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Too Early to Celebrate
September 30, 2009   
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An increase in lease transactions in the second quarter of this year over the first three months is an optimistic signal for the warehousing sector. Time will tell if this is the beginning of a new trend or only a temporary improvement.

In the second quarter the volume of lease transactions was 174,800 sq m, a 30 percent improvement over Q1. Approximately 92 percent of these were new leases including an expansion of area occupied, while renewed leases accounted for 8 percent of space leased this quarter, according to Cushman & Wakefield. Prospective tenants were particularly interested in attractive high-class locations in Wrocław, Warsaw, and in Upper Silesia. By end of June the supply of modern warehouse space in Poland was approximately 6 million sq m, according to C&W.

The highest rents were in the Warsaw area and reached 6 euros per meter/month. In other areas prices range between 3.25-4.00 euros per meter/month. In some regions actual prices are 30 percent below asking price.

Panattoni for pharmaceuticals
The first six months of the year belonged to Panattoni, which with a 45 percent market share has retained the leading market position. The firm concentrates on build-to-suit projects, and has recently signed an agreement to build two buildings for Torfarm, a pharmaceutical distributor that supplies chemist shops across Poland. The developer will build for its client two warehouse facilities with a combined area of 35,000 sq m. In the Warsaw region, a 23,000 sq m facility that is to include both warehouse space and office space will be built. In Poznań, Panattoni will build a warehouse facility of approximately 10,000 sq m as well as a 1,480 sq m office building. Warsaw construction is scheduled to begin in Q4, while construction of the Poznań warehouse complex will begin in Q1 of 2010.

Panattoni is also building using the so-called fee development system: ready to use and paid for by client funds. An example is the most recent contract with drug distributor Farmacol. The developer will build a 5,000 sq m building for Farmacol in Żerniki near Poznań.

In second place in terms of the net value of transactions-newly signed lease contracts only-in the first half of the year was ProLogis with a 36-percent market share, according to C & W. ProLogis from April 1 to June 30 signed lease agreements for over 104,000 sq m of warehouse space, with almost 75,000 sq m of that resulting from new leases. The largest deal was at ProLogis Park Chorzów (19,423 sq m for FM Polska), followed by ProLogis Park Wrocław III (19,315 sq m for Acer and 14,831 sq m for DHL).

New projects
MLP Group, another large player on this market, will in November begin building the first hall of the MLP Poznań logistics center in Koninko. The 6,500 sq m hall will be utilized by Havi Logistics, a McDonald's distributor. The warehouse will be equipped with an advanced refrigeration system. The developer is also planning an expansion at its MLP Tychy facility, home mostly to various production-based firms. Also in November an additional building will be added, this time the site of a modern baking facility.

Segro is also planning new projects. These will be buildings of the small business unit type, featuring space meant for use as office, small warehouse, and light production all in one. The first of these will be Segro Business Park Gliwice on Gaudiego St. Future clients will have available 10,000 sq m of modern business space with the smallest units offering 300 sq m. The park will be located within the Katowice Special Economic Zone, in the Gliwice sub-district. A smaller building will be put up in the already existing Tulipan Park ŁódĽ at 168 Rokicińska St. Here tenants will have 3,000 sq m available for use. The minimum amount of space for lease is 750 sq m.

A growing trend
Although the first six months of this year have brought an increase in new supply of warehouse space in Poland, it is worth remembering that these were mainly projects already begun during the previous year. The amount of space still under construction is decreasing-currently there are only eight such projects countrywide. Developers are most eager to build build-to-suit units which are built to order for specific clients.

And how does the tenant market look?

"Analysis shows that demand for warehouse space is generated mainly by firms from sectors that are less susceptible to market trends (FMCG, pharmaceuticals, food products, and so on). However, the size of the average lease deal has decreased and currently amounts to approximately 5,000 sq m," said Joanna Mroczek, director of market research and analysis at CB Richard Ellis.

Analysts say that Q2 this year was better than the first quarter. Does this mean stable growth?

"The current situation allows one to believe that the following months will be better and better, although it is too early for a clear forecast," said Maciej Chmielewski, Colliers International industrial and warehouse space division director and partner. "Warsaw still enjoys steady popularity with tenants, which shows in the total transaction volume regarding deals signed in the first half of this year," he added. "I think that this situation will hold. Regional markets-Silesia, Poznań, and central Poland-have grown in significance, but many firms still prefer locating their warehouse operations in the Warsaw region."
Magdalena Fabijańczuk

Golden Opportunity for Occupiers
Tom Listowski, Associate Director-Head of Industrial Department at CB Richard Ellis Polska:

With rents for existing modern warehouse space currently at a historical low in Poland, it appears that the opportunity for occupiers looking to relocate, expand or set up new warehousing operations and secure a good deal has never been more attractive.

With the major developers active on the Polish market such as Prologis, Panattoni and Segro predicted to freeze construction of any new major speculative warehouse projects for at least the next 12 months, the emphasis now is to lease up any vacant space available in their parks across the country.

In established industrial hubs, especially in Warsaw and the greater Warsaw area, where an oversupply of modern warehouse space in relation to demand is evident, developers are now showing much greater flexibility and offering very low rental levels in order to attract tenants and lease up what is currently standing vacant.

It must be noted, however, that the current deflation in rents mainly relates to existing space previously constructed and is not the case for newly constructed warehouse stock coming onto the market. Even though construction costs have come down since the start of the year, with yields moving out and the availability of credit being rather limited and more expensive in relative terms, developers now have no choice but to price this into any new projects which they plan to commence.

The demand and therefore prices for development land plots has also seen a sharp decline over the last three quarters. New warehouse and industrial developers looking to enter Poland are taking advantage of the reduced land prices and are now much more active in trying to secure land plots for future development.
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