Emerging Markets in the storage industry

Developers in Poland still focus on the most mature Warehouse markets, but it is visible that they also appear in emerging regions. Tomasz Mika, National Director, JLL says about the situation in Emerging Markets.

Magazyny.pl: During last few years both Lublin and Rzeszow were perceived as promising Emerging Markets on the map of Poland's logistic and manufacturing real estate. How does the situation look like, taking under consideration latest JLL report? 

Tomasz Mika, National Director, JLL: Road infrastructure still improves in these areas, and investments appear in local Special Economic Zones. We will certainly observe further development of these areas. As an example we can consider regions such as Szczecin and Kujawy, which include Toruń and Bydgoszcz, which grow really quickly and attract large projects. So far completed projects in Eastern Poland seem to be sufficient to the local market and it is not promising to start operations for a larger, international scale.

What is the list of emerging projects in Lublin and Podkarpacie?

In Lublin MLP is carrying out a project of 6,400 m2, while in Rzeszów the Waimea is carrying even smaller, named the Waimea Cargo Terminal Rzeszów - Jasionka, covering 4,700 m2. Previous contracts were mostly concluded with companies focused on servicing the local market.

What is the situation in Kujawy regarding the emerging projects?

Kujawy with a construction volume of 129 thousand m2 - in 4 projects - will soon reach the level of warehouse resources comparable to the Tri-City and Cracow region. Projects implemented there were in 81% secured with lease agreements.

The report also showed that Toruń's resources outstripped Bydgoszcz.

Exactly. At the end of 2016, Toruń with modern warehouses surface - 96 thousand m2, had bigger resources than Bydgoszcz. However in the next few months, the situation will reverse and after the completion of investments in Bydgoszcz it will be 129,000 m2. Additionally, on the demand side, Bydgoszcz is currently dominating Toruń.

What was the demand in Lublin?

Last year in Lublin gross demand amounted only 19.5 thousand m2 - limited to 5 transactions, of which 4 were included in Panattoni Park Lublin with food companies and logistic operators. On a yearly basis, already low demand has fallen by 25 percent. With similar situation we are dealing in the Podkarpacie region, where only 6 transactions were concluded in 2 logistics parks. However, in the region of Kujawy there was leased 127 thousand m2 and at the same time both, Lublin and Podkarbacie became downgraded. Other similarly sized Emerging Markets have responded much better on the demand side, although sometimes the result was achieved through one or two large transactions. Here is an example of Szczecin, which recorded a significant increase of demand for warehouses through two transactions signed by Amazon and Zalando, which together leased 291 thousand m2.

Does rents in Emerging Markets have a chance to encourage investors?

Of course. Base rents in Lublin remained stable during past year and ranged from € 3.2 to € 3.5 per m2 per month and effective from € 2.6 to € 3.2 per m2 per month. In Rzeszow the base rates were slightly higher and ranged from € 3.4 to € 4.0 per m2 per month. Effective ranged from € 2.6 to € 3.1 per m2 per month. The Kujawy region in this aspect is the most expensive location with effective rates from € 2.5 to € 2.7 per m2 per month.

Tomasz Mika