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The Warsaw Voice » Real Estate » September 30, 2013
The Real Estate Voice SPECIAL EDITION: EXPO REAL 2013
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Demand Still Strong for Modern Warehouses
September 30, 2013   
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Despite the economic slowdown there is no shortage of tenants interested in modern warehouse space.

The Polish warehouse market shows no signs of crisis. Demand for warehouse space has been growing since January. In the first two quarters of the year, the transaction volume exceeded 880,000 sq m. The volume of leasable space also increased.

“The total supply of modern warehouse space in Poland increased significantly in the first half of 2013,” says Maciej Chmielewski, a partner at Colliers International and director of the company’s Industrial and Logistics Agency in Poland.

“From January to the end of June, about 198,000 sq m was delivered to the market, 65 percent of which was delivered in the second quarter. At the end of Q2 2013, the total stock of modern warehouse space in Poland amounted to 7.55 million sq m. Currently, 283,000 sq m is under construction,” adds Chmielewski.

Warsaw is the largest warehouse market in Poland. According to Colliers International, the total supply of modern warehouse space in Warsaw’s three zones increased slightly during the first two quarters of 2013 and amounted to 2.6 million sq m. In Warsaw’s zone II, there is 1.77 million sq m, which represents about 67 percent of the total supply in Warsaw. Zones I and III account for 18 percent and 15 percent of warehouse space respectively. Currently in Warsaw, almost 51,600 sq m is under construction, the majority of which will be delivered in zone II.

In Central Poland—in the vicinity of Warsaw and in the central Mazovia province—the supply of modern warehouse space exceeded 1 million sq m in the first half of 2013, a level similar that observed at the end of 2012. In Q2 2013, 19,500 sq m was delivered to the market due to the extension of Tulipan Park Stryków. Currently, 8,000 sq m is under construction (at Panattoni ¸ódĽ East).

Upper Silesia continues to be the second largest industrial market in Poland, after Warsaw. At the end of H1 2013, the total stock of modern warehouse space increased by 50,500 sq m and reached 1.45 million sq m. A further 33,000 sq m is under construction.

The first half of 2013 saw no changes in the supply of modern warehouse space in the Poznań region. The total stock remained at 900,500 sq m, with almost 50,000 sq m currently under construction.

The situation on the Cracow warehouse market has not changed since the end of 2012. The total supply of modern warehouse space remains at 149,500 sq m. In Wrocław, the total stock of modern warehouse space increased by about 55,300 sq m in H1 2013 to 776,700 sq m. In Wrocław, more than 84,500 sq m is under construction at the moment. In Gdańsk, the modern warehouse stock increased by 14,000 sq m and amounted to 187,300 sq m at the end of H1 2013.

As far as demand is concerned, the three Warsaw zones were the most active markets in terms of transaction volume in H1 2013. Lease agreements for a total area of more than 267,000 sq m were signed, which constituted 30 percent of the total transaction volume nationwide. This is a better result than the one noted in the corresponding period in 2012, when 191,000 sq m was leased in the first two quarters of the year. In central Poland, in the first half of 2013 tenants leased 125,000 sq m. The transaction volume in Poznań at the end of H1 2013 was similar to that in H1 2012, and amounted to 101,800 sq m. In Upper Silesia, more than 154,000 sq m was leased in the first six months of 2013. This represents 18 percent of the total transaction volume in Poland and is the second best result nationwide. In Cracow, 13,600 sq m of warehouse space was leased in the first half of 2013. In Wrocław, 135,000 sq m was leased in H1 2013. In Gdańsk, the transaction volume reached 20,000 sq m, which represented only 2 percent of the transaction volume nationwide.

Logistics companies the main tenant

The largest deliveries in the first half of the year included a build-to-suit (BTS) facility for the Lear company in Legnica (32,000 sq m), a new building within Segro Industrial Park Tychy for an automotive occupier (18,000 sq m), and a new building located within the Segro Logistics Park Stryków (15,000 sq m). Panattoni was the most active developer in H1, having completed over 66,000 sq m, followed by Segro (46,000 sq m) and Goodman (25,000 sq m).

At the end of the second quarter, 249,000 sq m was under construction, with the largest volume in the Wrocław region (71,000 sq m, already let) followed by Central Poland (58,000 sq m) and the Warsaw suburbs (42,000 sq m).

Logistic operators were the most represented sector in net take-up (at 36 percent—over 171,000 sq m of the floor space), followed by the automotive sector (with 111,000 sq m, translating into a 23 percent market share), retailers (15 percent), and food operators (10 percent).

According to Jones Lang LaSalle, this level of demand will be sustained in the following months, especially as Poland’s GDP growth is expected to edge up in the second half of the year, according to most forecasts. Additional factors that could drive demand are the rising significance of e-commerce, the government’s plan to extend the life span of Poland’s special economic zones, and, over the longer term, increasing throughputs recorded in Polish container ports, which can influence the supply chains of numerous logistic operators.

Tomasz Olszewski, Head of Industrial Agency in Central and Eastern Europe at Jones Lang LaSalle, said, “Despite the general economy running in a lower gear, the demand for warehouse and production facilities registered a rebound when compared to the same period last year. This, along with the risk aversion of the major developers, who are still not eager to start speculative developments, has led to a gradual drop in the vacancy rates in the main regions, some of which are now experiencing supply gaps. Today, the search for larger units exceeding 10,000 sq m is a challenge and occupiers who are not flexible in terms of location and timing will find it difficult to secure an appropriate unit at a competitive price. On the other hand, tenants looking for smaller floor sizes now have a wider spectrum of options”.

At the end of the second quarter, the vacancy rate in Poland stood at 10.6 percent, down from 11.5 percent in the same period last year.

The relative rental stability observed during 2012 has also been recorded since the beginning of 2013. However, small fluctuations have been observed in some of the regions. Final values are dependent on individual negotiations, the quality of a particular facility, its location, vacancy rate in the region, and the size of the leased premises. For Warsaw suburbs, effective rents for “Big Box” facilities range from 2.10 to 2.80 euros per sq m per month. The highest rents are in smaller markets such as the Gdańsk-Sopot-Gdynia Tri-City area (from 2.80 to 3.30 euros per sq m per month), Szczecin (from 2.80 to 3.40 euros per sq m per month), and Cracow (from 3.30 to 4.00 euros per sq m per month).

Experts say the relatively good situation on the warehouse market should continue. “There are no significant changes predicted to take place in the Polish industrial market in the second half of 2013,” says Chmielewski. “The market will be still dominated by BTS agreements. It is estimated that in H2 2013, demand will remain stable and high in Warsaw and most regional markets. However, there is a possibility of a slight decline in the transaction volume. The interest in regions such as Upper Silesia, Wrocław and Poznań is expected to continue to grow. The dynamic development of the e-commerce sector will continue to drive the demand for modern industrial space.”

Spur from container port development

There is another factor that can become a driving force behind the development of Poland’s industrial/warehouse market. According to Jones Lang LaSalle, the growth of container terminals, especially the deepwater ones, will have a positive influence on the Polish industrial warehousing market, especially in regions adjacent to the coast. What’s more, the inflow of products and the opening of new transportation opportunities is expected to stimulate the logistics sector, including transshipment centers across Poland.

Three of Poland’s seven neighbors are landlocked countries. As a consequence, Poland’s favorable geographical location ensures the expansion of the country’s container port catchment areas to border regions of neighboring countries. Additionally, investment in railway, intermodal and road infrastructure, which will improve connectivity with the south, and improved connections between the countries in the region, can boost the competitiveness of Polish terminals in the CEE region.

The growth of seaports will be the force driving the demand for warehouses located not only in the north but throughout the country, following the streamlining of distribution lines.

According to a survey by Jones Lang LaSalle, 48 percent of respondents plan to use more warehouses on the coast in the next few years. In most cases this will be due to expanding the natural catchment areas of Polish ports and their increased throughputs. This is an impressive result, especially considering that at present this region has only a 3-percent share in the Polish warehouse market.

Poland Remains Attractive
Magdalena Szulc, Segro’s Business Unit Director for Central Europe
This year has brought no spectacular changes on the Polish warehouse market. Most of the new projects are still build-to-suit facilities fully adapted to the needs of customers and enabling tenants to take part in the project from the design stage onward. Renegotiations account for a significant percentage of the contracts concluded in recent months. Due to the interest of both our old and new customers, we are currently pursuing projects for the expansion of most of Segro’s parks in Poland, including Segro Logistics Park Stryków, our largest investment project in Central Europe. Looking at the current economic situation, we expect to see a constant level of interest in warehouse as well as production space from both companies already operating on the Polish market and those transferring their operations from Western Europe. The traditional logistics destinations in the country such as the Warsaw conurbation, Silesia and central Poland, continue to generate interest; they are gaining importance due to the expansion of the road infrastructure. Being close to major routes enables tenants to optimize their operations in both Poland and across Central Europe. We expect that, thanks to the proximity of major transport routes in Europe and the availability of skilled labor, Poland will remain an attractive logistics destination in the region. We also expect that the current level of rents will be maintained, because there have been no dynamic changes in the vacancy rate in Poland.
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