Poland - the seventh largest industrial market in EU

Total industrial stock in Poland now stands at 16.9 million sq m. Gross take-up in the first half of 2019 exceeded 1.6 million sq m. In addition, over 1.1 million sq m of new space was delivered to market and 2.2 million sq m is under construction.


Demand

Robust demand has spread all over Poland. Gross take-up exceeded 1.6 million sq m and - interestingly - it was generated by a number of medium-sized contracts instead of spectacular transactions. In turn, net demand, i.e. taking into account new contracts and expansions, was 1.1 million sq m.

“In the first half of the year we observed a decrease in the share of new contracts and expansions in total demand. However, nearly 350,000 sq m of space was leased as part of renegotiations of existing contracts. One of the factors determining this situation was undoubtedly the expiration of lease agreements signed in 2013-2014, when the market was experiencing a period of intense development”,comments Tomasz Mika, Head of Industrial Poland, JLL.

Logistics operators is the most active tenant segment, followed by retailers and light manufacturing companies. These three sectors together accounted for almost 80% of net demand recorded in H1 2019.

“Demand for industrial space was visible throughout the country, with the highest tenant activity being recorded in the Warsaw Suburbs, where agreements for a total of 460,000 sq m were signed, followed by Wrocław - 276,000 sq m and Central Poland - 216,000 sq m. On markets outside the Big Five, gross demand was 240,000 sq m, of which new agreements accounted for 186,000 sq m. The development of Kielce, Podkarpacie and Białystok continues apace as developers secure more land for future projects in these areas”,addsMaciej Kotowski, Research Analyst, JLL.

Supply – just shy of 17 million sq m

The buoyant condition of Poland’s industrial market was once again confirmed by excellent activity on the construction side.

“During the first two quarters of the year new developments totaled more than 1.1 million sq m, the highest half-year result in the history of the market. This led to total stock standing at almost 16.9 million sq m”, commentsMaciej Kotowski.

Central Poland remains the leader in terms of the volume of new supply, where over 250,000 sq m was delivered in the first half of 2019. It was the fastest growing market in Poland with a total stock increasing by over 35% over the last twelve months.

“At the end of H1 2019, 2.2 million sq m of space remained under construction, of which the largest markets - Upper Silesia, Wrocław, Central Poland, Warsaw and Poznań – accounted for 86% of this number. It is worth noting that developers are bullish about the Polish market, which is confirmed by the volume of space built on a speculative basis - the share of which now totals 45%. This is particularly visible in the largest metropolitan areas - over 270,000 sq m was being developed on a speculative basis in Upper Silesia, followed by about 175,000 sq m in Warsaw and Wrocław, and 140,000 sq m in Central Poland. Large speculative investments can also be found in the Tri-City, Szczecin, Krakow and Kujawy”, says Tomasz Mika.

Vacancy rate and rents

The increase in space developed on a speculative basis has led to a slight increase in the vacancy rate. The average vacancy rate in Poland was 6.3% at the end of H1 (5.7% in Q1). This situation can change quickly, as vacant space is absorbed on a regular basis due to high demand from tenants. A good example of this is Białystok, where the vacancy rate dropped from 36% to 22% in just one quarter.

In Q1 2019 tenants saw a gradual increase in rents. This slight uptick is still limited, however, by the amount of new supply. An increase was particularly noticeable in Warsaw, Wrocław, Poznań, Szczecin as well as in Opole and in the Lubuskie region. The rents in Warsaw Suburbs increased to EUR 3.8/sq m/month. Warsaw Inner City remains the most expensive market, with headline rents ranging from EUR 4.3 to 5.25/sq m/month. The most attractive rents are offered for big-box units in Central Poland (2.6 - 3.2 EUR/sq m/month).


Tomasz Mika