Demand for warehouses stable in Poland
According to the latest data by CBRE, the world’s largest commercial real estate services company, at the end of Q1 2013, the total stock of modern industrial and warehouse properties in Poland reached 7.4 million sq m, with an average vacancy rate of around 10%, with single digit rates only in the regions of Silesia, Poznan and Wroclaw.
The demand for modern logistic space in 2012 was about 1.8 million sq m, similar to that in 2011. Around 70% of 2012 leasing activity was reported outside of the Warsaw region, with circa 230,000 sq m in the Silesia region and over 105,000 sq m in the Poznan hub. The most active tenants are from the logistics sectors, driven by FMCG and e-commerce, and from the manufacturing sector, driven mainly by the automotive business and other key industries. According to CBRE experts, warehouse demand in 2013 should remain at 2012 levels.
Joanna Mroczek, Director, Research & Consultancy, CBRE in Poland:
“Poland is perfectly positioned to act as a distribution hub for companies shipping their goods to the growing economies of Central and Eastern Europe and beyond, as well as servicing large domestic demand. This is set to continue in the future with the growth of e-commerce as well as other segments of the market expanding their operations.”
In 2012 developers started the construction of around 310,000 sq m. A large share of those properties are classified as BTS (built-to-suit) projects, equal to approximately 40% of the total 2012 industrial and warehouse supply. Rental rates in 2013 are expected to remain similar to those recorded in 2012, especially in locations with high vacancy levels. Some regions such as Silesia (4% vacancy rate), Poznan (5%) or Wroclaw (7%), should experience some upward pressure in terms of rental rates due to limited supply.
“The Polish industrial and logistics market is currently tenant driven, with space and qualified labour force readily available in most locations. However, in some regional hubs, especially those with low vacancy rates like Silesia, Poznan and Wroclaw, there is an upward trend observed in terms of demand and rental rates, more towards the developers’ market.”
Warehouse investment going up
Over the years the logistics sector accounted for about 10% per annum of the total investment volume in the commercial real estate sector, well behind the retail and office sectors. This changed for the first time in 2012, with a large number of logistics investment transactions being concluded, including the sale of three large portfolios. In 2012 total commercial property investment volume in Poland reached EUR 2.7 billion, with the logistics sector accounting for EUR 460 million, or 17%, marking a significant growth compared to previous years.
Some core funds active in the market are considering logistics properties in an attempt to diversify their portfolios and spread their risk. Poland as an investment location attracts with its strong underlying fundamentals, growing occupational market and the promising outlook for the future. Furthermore, with the huge development of infrastructure such as newly constructed motorways, express roads and airports, the market is also reaping the benefits of its convenient geographical location which international occupiers and investors are appreciating.
“Although Poland is an attractive investment market and a number of funds are active here, the investor ‘pool’ is shallow and the focus is on newly constructed, prime located assets with long term income in place (+ 7 years). For these type of prime assets, we are witnessing strong competition from the core German and US based funds. However, if a property does not tick all the core buyers requirements, the potential exit is much more limited. For this type of asset there are less funds active and the potential pricing is discounted. At the same time, a number of properties from this asset class are available on the market with no or very limited demand.”
Warsaw I (within 15 km from Warsaw city centre) – space readily available at stable rates
Total industrial and warehouse stock within Warsaw I amounts to about 630,000 sq m in modern warehouses and warehouse business parks, often comprising mixed-use buildings offering smaller units, even below 800 sq m. The properties are located in proximity to major roads or the airport, in industrial districts such as Wlochy and Okecie as well as Mokotow (south-west part of the city) or Zeran in the north. Projects located within the city borders usually offer higher quality and more office space. The largest warehouse complexes include City Point (117,000 sq m) and Zeran Park I (over 60,000 sq m), both located in the north-eastern part of the city. At the end of 2012 the vacancy rate stood at 17%, mostly in older, B-class premises. The pipeline for modern industrial and warehouse space includes 6 projects with a total size of circa 100,000 sq m, comprising both new schemes and extensions of existing parks.
Due to higher rents and limited availability of larger units, the Warsaw I sector typically attracts smaller tenants, such as companies offering business services, retail operators or FMCG suppliers. Prime headline rates in the Warsaw I industrial sector are about EUR 4.30 – 5.00 /sq m/month, while the effective rates are EUR 3.90 – 4.40 /sq m/month.
In terms of logistic rental rates, Warsaw remains way behind the world’s most expensive locations such as Tokyo with prime rents at EUR 13.64 /sq m/month, London with EUR 13.22 /sq m/month, or Singapore with EUR 12.06 /sq m/month. According to the latest CBRE data, no CEE city made it to the world’s top 10 most expensive logistic locations, with Paris closing the top 10 list with industrial rates at EUR 7.46 /sq m/month.
Warsaw II (15-80 km from Warsaw city centre) – space abundance in less favourable projects, vacancy rates slow to go down
The stock in industrial and logistics parks in Warsaw II exceeded over 2.1 million sq m in 2012. This region comprises industrial and warehouse parks located in the region of Warsaw, along major roads. This zone is particularly attractive for large tenants, due to the capital’s proximity and significantly lower rents compared to Warsaw I locations. The availability of large greenfield sites for potential expansion is an additional magnet for developers. The most popular locations include Pruszkow, Ozarow or Piaseczno. The recent completion of the A2 highway (connecting Warsaw with Lodz and Poznan) has significantly enhanced the advantages of locations to the west of Warsaw. The vacancy level has fallen significantly since 2011 and now stands at 15%.
Currently, there is over 36,000 sq m under construction in three projects, including Tulipan Park Warszawa (23,500 sq m) and around 1.2 million sq m is planned for the region with the majority of projects proposed near Pruszkow, Mszczonow, Blonie and Sochaczew.
Overall leasing activity in Warsaw II amounted to circa 540,000 sq m in 2012. The most active tenants are logistic and retail operators as well as pharmaceutical and petrochemical manufacturers. Prime headline rates in the Warsaw II industrial sector are about EUR 2.50 – 3.60 /sq m/month, while the effective rates are EUR 1.90 – 3.00 /sq m/month.
New regional markets emerging
A notable development is the emergence of new regional logistics markets. The eastern part of Poland with Rzeszow and Lublin has been gaining considerable interest in recent years, due to its location near Poland’s eastern border, availability of cheap land and existence of special economic zones, with the presence of a variety of Polish and international production companies. The total logistics space stock is just 128,000 sq m, however, further developments are already in construction or planning.
Another emerging logistics market is Bydgoszcz and Torun, enjoying a central location in Poland and benefiting from access to the A1 north-south motorway. The recently established special economic zone in Lysomice near Torun attracts electronics and telecommunications producers as well as FMCG firms. With the existing stock of a mere 80,000 sq m, the region has over twice as much in the planning stage, with good prospects for future growth.
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