According to JLL data for the first half of 2016, more than half of the warehouse space under construction in Poland is being developed on a speculative basis, that is without binding lease agreements. “Clients are increasingly unwilling to wait for their warehouses,” says Tomasz Mika, Head of Industrial Department Poland at JLL.
JLL analysts say that 742,000 sqm of space is currently being developed in Poland, with speculative development accounting for as much as 51 percent of that space. “This is a clear sign of the great trust placed in the Polish market by developers, who can see its potential for further growth,” says Tomasz Mika. In some developing regions, a vast majority of investments in done on a speculative basis. Goodman and Panattoni Europe are carrying out two projects of this type in each Kraków (95% of space built on a speculative basis) and Tricity (93%). According to JLL analysts, locations with potential for speculative investment projects also include Poznań, Wrocław and smaller markets with a shortage of finished warehouses.
“Speculative investment projects are largely carried out in reliable locations with a strong presence on the map of existing warehouses. They are being developed in locations that attract tenants with advantages such as extensive infrastructure,” explains Tomasz Olszewski, Head of Industrial CEE, JLL. “However, there is also a demand for modern space in the so-called developing regions, where facilities of this kind are likely to find their tenants,” adds Olszewski.
“It should be noted that even with such a significant increase in speculative development, the market will still absorb it rather easily,” emphasises Tomasz Olszewski. The JLL expert points out that in order to generate profit, warehouses built on a speculative basis have to be properly planned. “Investments of this type are preceded with a very careful market analysis,” says Olszewski. This is confirmed by Paweł Sapek, Senior Vice President and Country Manager Prologis. “We always analyse our locations, especially with regard to the vacancy rate and demand for warehouses, before we decide to launch speculative developments there,” says Sapek in an interview with Newseria.
“In most cases, developers manage to lease out the entire space in a speculative development before its construction is completed or just after the facility is delivered,” says Tomasz Mika. He cites the Gdańsk-Kowale IV Logistics Centre, which was fully commercialised just a month after it was delivered. Its developer also underlines its success.
“The construction of the 17,500 sqm centre was started in the autumn of 2015. Just in the first two months, we signed contracts for 60 percent of the space. Moreover, Gdańsk-Kowale IV is not the first of our speculative developments that was commercialised in just a few months,” says Ryszard Gretkowski, Vice-President of the Management Board of 7R Logistic S.A. “Being aware of the huge potential of this location, as well as the market demand, we decided to develop another warehouse in our logistics park in Kowale, the fifth such facility there,” says Ryszard Gretkowski.
According to JLL’s Tomasz Mika, the percentage of speculative developments in the warehouse industry is likely to stay at this high level, as the tenants’ appetite remains high as well. Lease contracts for a total of 1,312,000 sqm were signed in the first half of 2016. “This is the best six months’ result in the last 10 years, which bodes well for the rest of the year,” adds Mika. Developers are also aware of this potential for growth. Robert Dobrzycki, Chief Executive Officer Europe in Panattoni Europe, believes that the vacancy rate is not going to increase in the near future. “This will be dictated by the growth of the e-commerce industry, which generates large demand,” says Panattoni’s CEO.
JLL reports show that the demand for warehouse space remains at a high level, while the vacancy rate stays low, amounting to 6.1 percent in the first half of 2016. “Since there are plenty of tenants willing to lease warehouses and there is not that much of immediately available space on the market, many companies are not afraid of developing on a speculative basis,” adds Tomasz Mika, JLL.