The Warsaw Voice » Real Estate » Monthly - September 30, 2011
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Growing Interest in Warehouses
After a period of stagnation caused by the crisis, demand for modern warehouse space has revived in Poland.

According to a recent report by consulting firm CB Richard Ellis on the market for warehouse and logistics space in Central and Eastern Europe, 2011 is expected to be a time of growing supply and demand for modern warehouses, especially in Poland and Russia.

Joanna Mroczek, market research director at CB Richard Ellis, said, “Logistics space developers have visibly increased their activity over the past several quarters.”

Forecasts of 4-percent economic growth in 2011 in Poland and Russia, the two largest economies in the region, have helped produce a considerable increase in demand and supply in this sector, she said.

“An increase in manufacturing has prompted a shift of development activity from capital cities towards regional cities. This is especially the case in the Czech Republic and Poland but also to some extent in Hungary and Slovakia. In most markets, developers are going ahead with their projects after signing pre-let agreements with prospective tenants or are undertaking build-to-suit projects meeting specific orders and detailed customer technical specifications,” Mroczek added.

Due to a slowdown in the economy and the economic crisis, the number of warehouse and logistics centers built by developers has decreased significantly in the last two years. After an uninspiring 2009, developers almost stopped building new facilities. According to data by real estate services company Jones Lang LaSalle, in 2010 only 270,000 sq m of new warehouses were completed in Poland, over 1 million sq m less than in 2008, which was a record year in this respect. The largest warehouse completions were Panattoni BTS Tesco Gliwice and Panattoni Park Toruń (BTS for Cereal Partners Poland Toruń-Pacific), yielding 56,700 sq m and 30,300 sq m respectively.

Currently, the modern warehouse space stock in Poland amounts to 6.5 million sq m. Most of this space was completed between 2004 and 2008. The years 2006-2008 were a boom period for the warehouse market as the demand for space exceeded the rate of new developments and warehouses were leased before their construction was completed.

Joanna Sinkiewicz of Cushman & Wakefield said, “Speculative construction ground to an almost complete halt due to difficulties with obtaining financing. Since 2009 tenants have become increasingly interested in build-to-suit schemes which, apart from the possibility of tailoring the technical specifications to individual requirements, can also be constructed in locations selected by the tenant. Such projects will unquestionably contribute to the development of the warehouse space market in new locations. Headline rental rates vary, depending on the region, and fall within the range of 3-6 euros per sq m per month.”

According to Cushman & Wakefield, the first half of 2011 was the best period for the warehouse sector since the financial crisis. Following the boom years of 2006-2007 and stagnation in 2008-2009, the warehouse market recovered in 2010 and continued to gain momentum in the first six months of 2011. Take-up rose by 40 percent and the number of schemes under construction was nearly twice that of the corresponding period of 2010. The warehouse market is developing not only in new regions such as Rzeszów and Lublin, but also in established regions such as central Poland (Radomsko, BTS Manuli) and the Poznań region (Gorzów Wielkopolski, BTS Faurecia).

“Transaction volume reached nearly 941,000 sq m in the first half of 2011 with record take-up of 543,000 sq m in the second quarter,” said Malwina Kierebińska of Cushman & Wakefield’s industrial department. “Such strong demand has not been seen since early 2008. Leases for new space or extensions accounted for 75 percent of all deals. Demand came mostly from logistics operators (37 percent), electronics companies (14 percent) and the automotive sector (10 percent).”

With 40 percent market share, Prologis dominated the development market, with renewals accounting for nearly 50 percent of total deals, according to Cushman & Wakefield. It was followed by Panattoni (18 percent), Goodman (8 percent) and SEGRO (6.5 percent). Some 136,000 sq m of warehouse space was delivered in the first half of 2011. The largest completions included Zelmer’s scheme in Rzeszów (32,500 sq m), developed by Panattoni; phase I of Good Point II in Góra Kalwaria (21,900 sq m); the first building of Kraków Airport Logistics Center (Goodman, 13,400 sq m) and Danone’s building in Panattoni Park Święcice (13,600 sq m). At the end of the second quarter 336,000 sq m was under construction, and as in the previous year some 80 percent of this space was leased. Schemes to be completed without pre-lets accounted for only 63,000 sq m. Despite the upturn in the market, speculative projects were rare and usually developed as small modules in buildings with some pre-lets secured, for example small business units in Tulipan Park Łódź. Regions with the largest warehouse development volume under construction include Upper Silesia (81,000 sq m), Wrocław (66,000 sq m) and central Poland (54,000 sq m). At the end of June 2011 the vacancy rate reached 12.9 percent, down by 2.1 percentage points from the level at the end of the previous year.