Warehouse demand is driven by e-commerce and supply chain reorganisation
Warehouse take-up topped 1.5 million sq m for the third quarter in a row. The leasing volume in the year to date hit a record high of 4.95 million sq m, representing a 40% increase year-on-year. Net take-up experienced even a faster growth rate, coming to 3.73 million sq m (up 49% year-on-year). It is a better result compared to last year, when new leases and expansions totalled 3.45 million sq m.
“The strong performance was plainly driven by the continued expansion of e-commerce which is expected by all forecasts and research to continue to post double-digit annual growth going forward. Besides, with disrupted global supply chains and long waiting times for deliveries of many goods, from vehicles to green tea, companies want to safeguard the flow of logistics processes and are leasing buffer warehouses and implementing nearshoring, or outsourcing processes and operations closer to home,” says Damian Kolata, Partner, Head of Industrial & Logistics Agency | Poland, Head of E-Commerce | CEE.
Vacancy rate falls as development activity continues to accelerate
Close to 1.08 million sq m of industrial space was delivered across 33 new completions in the third quarter of 2021, which represents the highest ever development activity in one quarter. Despite the high supply level, the vacancy rate continued its downward trend and edged down by 0.8 pp over the quarter and by 3.4 pp year-on-year. Net absorption amounted to 1.19 million sq m in the third quarter, surpassing new warehouse supply for another consecutive quarter. Nearly all regional markets saw their vacancy rates fall, with the largest downward year-on-year movements in Tricity (2.4%; -7.3 pp), Wrocław (3.6%; -4.8 pp), Warsaw Suburbs (4.0%; -4.6 pp), Krakow (0.8%; -3.8 pp) and Poznań (3.6%; - 3.5 pp)
“The industrial sector continues to power ahead on virtually all the regional markets across Poland. The country’s core regions, which include Warsaw, Upper Silesia, Łódź, Poznań and Wrocław, account for close to 70% of all projects underway. Development activity is also accelerating in other markets such as Bydgoszcz and Toruń, Szczecin and in western Poland, where new projects have broken ground in Jelenia Góra, Głogów and Zgorzelec. Robust demand across all the market segments, including BTS projects, regional multi-let/big-box distribution centres, SBUs and cross-dock facilities for urban logistics, is contributing to the record levels of construction activity in the Polish industrial sector,” says Adrian Semaan, Senior Research Consultant, Cushman & Wakefield.
In the third quarter of 2021, in response to the strong demand growth and shrinking availability, developers commenced the construction of many new projects with a total area of more than 1.4 million sq m. At the end of September 2021, the warehouse development pipeline stood at a record high of 3.73 million sq m. Of that total, over 1.6 million sq m was not secured under pre-lets, which is an indication of the largest volume of speculative construction ever. If all projects underway come to fruition in the next nine to twelve months, Poland’s total industrial stock will increase from the current 23.1 million sq m to almost 27 million sq m by the end of 2022.
Rents hold firm but likely to edge up
Rental rates remained largely unchanged on most regional markets in Poland in the past quarter. Headline rents currently stand at EUR 2.80–3.80/sq m/month for big-box warehouses and at EUR 4.00–5.25/sq m/month for SBUs. Effective rents continue to range between EUR 2.00–3.10/sq m/month, depending on project location. We expect headline rents to edge up in the coming quarters, especially for new developments in prime logistics locations, with the growth driven by rising land prices and construction costs. With these factors at play, developers are also likely to be less willing to grant financial incentives. Having said that, we do not expect to see strong rental growth as the industrial development pipeline remains robust amid intense developer competition.