- Market uncertainty remains high due to the war in Ukraine, high inflation, the energy crisis and the risk of a global recession. These factors are directly contributing to the forecasted slightly weaker market development.
- Leasing activity for the first three quarters of 2022 hit a record high of 5.4 million sq m.
- Poland’s warehouse vacancy rate rose for the first time since September 2020. New supply surpassed 1 million sq m in each successive quarter of the year, improving warehouse space availability.
- Warehouse rents rose by an average of 25% over the year.
An overview of the Polish economy
Inflation has surged past the target of the National Bank of Poland, compelling the bank to raise its key interest rate several times over the year. Moody’s Analytics projects that Poland’s GDP growth will reach 3.7% in 2022 and 0.9% in 2023, indicating an economic slowdown.
Both the weaker GDP growth and continuously rising living and business costs are an indication that the Polish economy is slowing down, largely due to rising energy costs, supply chain issues and the worsening consequences of Russia’s invasion of Ukraine.
Warehouse demand in Poland remains strong
Total leasing activity was 5.4 million sq m for the first three quarters of 2022 - up 7% year-on-year. Net take-up, which includes only new leases and expansions, remained strong at 3.8 million sq m, although the 1 million sq m mark was not surpassed in the third quarter.
Occupier demand was the strongest in Silesia, Mazovia, Greater Poland and Łódzkie, generating over 70% of Poland’s take-up. The focus of occupier activity is also shifting towards warehouses in the Lubuskie and Pomerania markets.
Warehouse supply hits a record high amid an increase in availability
Total industrial stock in Poland stands at 27.4 million sq m, up by 18% year-on-year. Each successive quarter of 2022 saw over 1 million sq m of warehouse space delivered onto the market. Speculation construction accounts for around 50% of the total supply, marking an improvement in warehouse space availability. The overall vacancy rate stands at 4.2%, up by 0.9 pp on the historic low in the first half of the year but well below 5% posted in Q3 2021. Warehouse availability improved on most regional markets, with Lower Silesia reporting the strongest twofold increase - around 271,000 sq m of warehouse space currently remains vacant, accounting for 7.5% of the region’s total stock.
“The Polish industrial sector experienced stable growth in the first three quarters of this year. New supply exceeded 1 million sq m for the third time in a row, with Poland’s total industrial stock likely to surpass the 30 million sq m mark in the first quarter of 2023. Healthy supply levels go hand in hand with substantial net take-up which came to close to 1 million sq m, down from the previous quarter’s 1.6 million sq m but evidence of strong leasing activity. The outlook for the quarters ahead remains positive given the favourable trends towards nearshoring and the growth of the CEP sector (the volume of courier parcels surpassed a staggering one billion last year and is expected to rise by another 31% next year to 1,332,000,000) and the continued growth in online retail sales (according to Statistics Poland (GUS), the share of e-commerce in total retail sales was 9.7% in September 2022, up by 1.3 pp on the same time last year, having more than doubled since pre-pandemic, albeit other research centres put it at 13% - three times higher). We must, however, bear in mind the uncertainty surrounding high inflation and tight project financing conditions,”
- says Damian Kołata, Partner, Head of Industrial & Logistics Agency Poland, Head of E-Commerce CEE, Cushman & Wakefield.
Rents are also rising
High inflation and rising development costs are the main drivers for the increasing growth of warehouse rents in Poland. Headline rents for prime logistics projects within the main industrial markets are up by an average of 25% on last year’s figure.
The last few months have seen a slowdown in the rental growth dynamics thanks to a relative stabilization of construction costs, although some markets are still experiencing upward pressure on rents due to the limited warehouse space availability.
At the end of September 2022, headline rents ranged from EUR 3.40-5.50/sq m/month in big-box projects to EUR 5.00-6.50/sq m/month for City Logistics/SBU projects. In the current market conditions, the range of financial incentives being offered to tenants is narrowing, leading to an increase in effective rents. Depending on the location, these range from EUR 2.70-4.20/sq m/month (big-boxes) to EUR 4.50-5.50/sq m/month (City Logistics/SBU).
The Polish industrial market remains competitive compared to other European markets
In an unstable economic and geopolitical environment, negotiation processes have become prolonged and these may in turn negatively affect demand dynamics. However, the fundamentals for the warehouse market development remain strong.
Poland continues to be one of the most attractive industrial and logistics markets for investment: the combined costs of warehouse lease, energy consumption and labour are still among the lowest in Europe - as much as 34% lower than in the Czech Republic and 62% lower than in Germany.
