After a very successful 2021, the Polish warehouse market continues to power ahead. In addition to the big five, new well-connected locations are coming up on developers’ radars. The growth of e-commerce continues to drive the construction of greener and more employee-friendly buildings. Challenges facing the market however include rising development costs, shrinking land banks and a dearth of warehouse workers. Newmark Polska asked the most active developers for their market projections.
“Warehouse and industrial take-up in Poland for the whole of 2021 hit a record high of over 7.3 million sqm, representing an increase of more than 40% on 2020 and of close to 80% when compared to 2019. Space availability visibly declined. Poland’s overall vacancy rate reached 3.9% at the end of 2021, with warehouse availability at its highest in Silesia, Mazovia and Central Poland,” says Agnieszka Giermakowska, Research & Advisory Director, Newmark Polska.
According to preliminary estimates, warehouse supply exceeded 3 million sqm in 2021, more than the previous peak of 2.7 million sqm in 2019. Last year’s largest completions included Panattoni’s BTS facility comprising 200,000 sqm for Amazon in Świebodzin, Hillwood Rokitno (112,000 sqm), GLP Lędziny Logistics Centre (111,500 sqm) and a 108,000 sqm BTS project for DHL Supply Chain in Panattoni Park Poznań, Żerniki.
The market looks set for another good year
The analysts of Newmark Polska expect to see new highs on the warehouse market in 2022. “Demand will remain robust due to permanent changes to shopping patterns in Poland, improvements to supply chains and e-shoppers increasingly expecting faster, preferably same-day deliveries,” says Jakub Kurek, Head of Industrial and Warehouse, Newmark Polska.
Developers will remain very active – at the end of last year there was more than 4.6 million sqm of warehouse space under construction; of that total, approximately 2.8 million sqm was being developed by Panattoni. More than 80% of the development pipeline is likely to be completed by the end of December 2022, says Newmark Polska. This is also borne out by reports from investors. In 2021, Panattoni, which has a portfolio of over 10.3 million sqm built across the country, reported leases totalling 3.2 million sqm, the largest deals comprising 146,000 sqm for Zalando in Bydgoszcz, 105,000 sqm for Zalando near Poznań, 82,000 sqm in Gorzyczki, 78,000 sqm for ID Logistics in Wrocław for e-commerce operations, and over 134,000 sqm in two locations for LPP. 7R, which currently has more than 4 million sqm underway, is planning to deliver close to 1 million sqm this year, which would represent an increase of 150% on last year’s completions. White Star Logistics will commence three projects this year and complete 175,000 sqm by December; another 100,000 sqm will be added to the market by SEGRO. At the same time, MLP Group expects to see its annual leasing volume reach 300,000 sqm.
New locations on developers’ radars
Poland’s five core warehouse markets (Mazovia, Upper Silesia, Central Poland, Lower Silesia and Greater Poland) – or the big five – have for years led the way for warehouse construction, accounting for approximately 77% of the country’s total industrial stock. According to the analysts of Newmark Polska, their dominance is, however, slowly ebbing away as new well-connected locations are coming up on developers’ radars. “We are seeing significant levels of interest in Western Poland, particularly Lubuskie and Western Pomerania. Tricity is also gaining in importance, and so are other regions. The total development pipeline in Podlaskie, Subcarpathia, Świętokrzyskie and Lubelskie amounts to close to 800,000 sqm of warehouse space,” says Jakub Kurek.
With more confidence and without pre-lets
Speculative construction has been steadily accelerating for the last two years, driven by slightly longer than usual turnaround times (up from 6-8 to 8-10 months) and the growing demand for warehouses for immediate occupation. By the end of 2021, approximately 55% of the development pipeline had already been pre-let while BTS (Build-To-Suit) projects accounted for 20% of the stock under construction.
“Given the current macroeconomic situation and excellent prospects for the warehouse sector, we are able to slightly increase the share of speculative projects compared to three or four years ago. The proportion in our portfolio is roughly 70% to 30%, where the latter is speculative space,” says Bartłomiej Krawiecki, Vice-President of 7R, Chief Operating Officer. Demand for space for immediate occupation has also been noted by MLP Group. “In addition to projects with secured pre-lets, we are also planning to build more on a speculative basis. Our objective is to maintain a stable occupancy rate at around 97% for our entire portfolio, with speculative development comprising up to 20,000 sqm per project,” says Agnieszka Góźdź, Director of Sales Department, MLP Group.
“Demand for logistics space is at a record high as the number of new projects breaking ground, including BTS developments, continues to grow. Rental rates are rising as availability is shrinking and clients are concentrating their efforts on building more resilient supply chains. With our global presence and focus on innovation, high tech and data, we deliver high-quality facilities in the most sought-after markets. We ended last year with a record low vacancy rate in Poland. The successful acquisition of the industrial portfolio in Łódź has greatly strengthened our position in Central Europe. In 2021, we completed nine warehouses with a total area of more than 216,000 sqm in four CE countries. And crucially, we continue to grow and see potential for growth,” says Paweł Sapek, Senior Vice President, Regional Head Central Europe, Prologis.
E-commerce and warehouses
The growth of e-commerce will remain a significant driver of the modern warehouse market. “As the sector continues to grow at pace, customers’ expectations are also rising in regards to faster and more efficient product deliveries. Most consumers say they would like to have online products delivered within no more than 48 hours. To meet these expectations, entire supply chains and last-mile transport, in particular, must be optimized; urban warehouses with Small Business Units are an important part of this,” says Agnieszka Giermakowska.
No wonder urban warehouses account for as much as 67% of the total value of SEGRO’s European portfolio. “Capitalizing on the popularity of e-commerce and the increased demand for SBUs, we want to continue to develop this part of our offer also in Poland. Typical SBUs are available, for instance, in our urban project SEGRO Business Park Warsaw Żerań, which is currently under construction,” says Magdalena Szulc, Managing Director Central Europe, SEGRO. “As e-commerce continues to play a growing role, 2022 will undoubtedly be another very successful year for the warehouse sector. Warehouses have to be conveniently placed to be closer to the end customer, so securing prime urban locations for new developments will be key.”
Prologis is developing its flexible SBU format in Warsaw. Its Prologis Park Żerań will provide customized BTS solutions as tenants will be able to combine units to expand leased space without moving warehouses.
7R, another major market player, has reported a growing appetite for manufacturing buildings. In the last quarter of 2021, Valeo Siemens eAutomotive, the leading supplier of motors and technologies for electric and hybrid vehicles, opened a factory in 7R Park Beskid II. In the previous year, 7R also strengthened its capabilities in data centre development which will remain a major item on its agenda for this year as well. “These are Build-To-Own (BTO) facilities, designed to meet individual requirements and developed in locations that guarantee uninterrupted operations and maximum protection against all external risks,” says Bartłomiej Krawiecki. “As automation in logistics is advancing, warehouses built several years ago no longer meet the current needs of tenants. A new market is therefore emerging as companies are looking for innovative buildings where modern technologies will play an increasingly important role.”
Panattoni also intends to be active in developing most warehouse formats. “We have always had a clear objective and plan – to follow clients and their needs. And that’s exactly what we do,” says Marek Dobrzycki, Managing Director, Panattoni. “That’s why we deliver not only warehouses for product logistics or manufacturing, but also data centres – we are currently developing buildings with close to 30 MW of capacity at full buildout, and are planning more. Our focus is also on brownfield projects which account for a growing share of Panattoni’s European portfolio. In Poland alone, they made up 35% of our completions in 2020 and 2021. We remain committed to sound land management and sustainable growth through revitalization and remediation, especially as such projects are core to urban logistics.”
Sustainable, economical and designed to enhance employee well-being
New warehouse formats emerge as construction and design standards evolve or even change fundamentally. Panattoni is the first developer in Poland to successfully introduce Excellent BREEAM certification for its developments: Panattoni Park Sosnowiec I and BTS Świebodzin, the latter itself having an area of over 200,000 sqm. Increasing the certification rating from Very Good to Excellent as the standard required many improvements as regards the energy efficiency of buildings, employee wellbeing and introduction of analyses such as LCA (Life Cycle Assessment) and LCC (Life Cycle Cost). “Our buildings are people- and environment-friendly thanks to our innovative design of aluminium and glass façades in offices as it blends well with our new concept of greenery. Our projects feature relaxation zones with sustainable street furniture, flowering meadows, hives and insect hotels,” says Marek Dobrzycki.
Prologis is driven by three key factors in laying out new technical specifications of its warehouses: reduce their carbon footprint, maximize cost efficiency for clients and provide a better employee experience. “Each new build must be ‘Very Good’ or higher BREEAM-certified and feature a clear height of at least 11.5-12 meters as standard. We also improve the fire resistance of our buildings, upgrade lighting into LED systems with motion and daylight sensors that deliver substantial savings on electricity bills and provide a safer and more comfortable work environment in warehouses,” says Michał Czarnecki, Vice President, Head of Capital Deployment & Leasing, Prologis. The developer also offers a range of on-site amenities to its tenants and their employees: from bicycle shelters and electric vehicle charging stations through to green break-out areas – and all that as part of Prologis PARKLife®.
MLP Group is planning to install photovoltaic systems on the roofs of its logistics facilities. Its photovoltaic installations in Poland will cover approximately 120,000 sqm and will initially have a total peak power of 6.4 MWp. This project is being rolled out in 10 logistics parks and is scheduled for completion in Q1 2023. Modern warehouse technologies facilitate savings and process optimization, but there is another area that is equally important: sustainable growth solutions. According to experts of Newmark Polska, green warehouses will be one of the key trends in 2022 and beyond. “Our newest projects developed to meet the requirements of BREEAM certification with a rating of Very Good or better, feature reinforced roofs for photovoltaic panels as standard. Tenants consume less electricity thanks to LED lighting and enjoy a healthier work environment in a loading dock area with double the usual number of skylights which take up four square meters per 100 sqm of rooftop space. Thermal imaging cameras used to control thermal insulation help to prevent uncontrolled heat losses. Smart metering is also provided as standard in our warehouses,” says Jarosław Czechowicz, Country Manager, GLP.
Another confirmation of this trend is SEGRO’s activity. “Much of our recent focus has been on net zero emissions from our facilities which we pledged to reach by 2030. In technical terms, this means greener and more ergonomic materials incorporated into the warehouses we deliver to our clients. Our net-zero strategy also provides for the installation of photovoltaic panels in selected buildings. According to our long-standing policy, all our new build properties undergo rigorous BREEAM certification, and some will soon be rated BREEAM Excellent. We are also at the forefront of implementing PropTech solutions – virtually all our parks feature modern number-plate recognition and utility monitoring systems, as well as electric and hybrid vehicle charging points,” adds Magdalena Szulc, Managing Director Central Europe, SEGRO.
Opportunities and challenges in 2022
Experts of Newmark Polska are expecting 2022 to be another record year for the warehouse market. “E-commerce and all sectors directly or indirectly connected with online shopping such as 3PL operators and courier companies will maintain a strong growth trajectory this year,” says Jakub Kurek. “Disrupted global supply chains have highlighted the importance of nearshoring, safeguarding supply chains and relocating production and warehouses closer to customer bases. Poland is certainly well-placed to benefit from such decisions and will further strengthen its position as one of the key industrial and warehouse markets in Europe.”
2022 will bring successes but developers will also face challenges. “As the prices of building materials have been steadily rising for quite some time and are anticipated to trend upwards, it will be a real challenge for the whole market to maintain profitability,” says Dominik Buczkowski, Industrial Development Director, White Star Real Estate. According to Prologis, the tight labour market, with a shortage of warehouse workers and retention issues, will also be a major challenge going forward. Another problem facing developers is the scarcity of development sites for new projects. “Both these factors will be a challenge for the whole market if demand for warehouse space continues to grow. And in regards to the situation on the labour market, we do our best to support our clients in attracting and retaining workers – we focus on providing easy access to our parks and a better employee experience in our warehouses. More automation is also being introduced in warehouses in response to the tight labour market; as a result, our facilities are specifically designed to enable tenants to implement modern technologies automating logistical processes more easily,” concludes Michał Czarnecki.
