Developer activity in the Polish warehouse market at the end of September 2021 remains at a high level. Completions in Q3 2021 660,000 sqm increased the total logistics and industrial stock to 22.4 million sqm. There are 3.46 million sqm under construction, of which over 1.22 million sqm (+120% y/y) are developments without secured leases. In the period under review, gross take-up amounted to 1.44 million sqm (+16% y/y), where, as expected, the e-commerce and logistics segments remained the main force. The correlation of strong demand and moderate new supply affects the vacancy rate, which stood at 5.04% at the end of September 2021 (-2.66 pp y/y). AXI IMMO presents the results of the latest report, "Polish warehouse market in Q3 2021".
Warehouses with nearly 50% share of the investment market after the first three quarters of 2021
The total volume of investment transactions in Poland's commercial real estate market after adding up the first three quarters of 2021 amounted to €3.53 billion. The warehouse real estate segment is responsible for nearly half (approx. €1.7 billion) of the capital generated during this period, with transactions of €800 million in Q3 alone.
Among the largest warehouse investment transactions selected in Q3 2021 was the sale of the Tristar portfolio (160,000 sqm) with properties in Poznań, Wrocław, Warsaw, Czeladź and Gdańsk to Exeter. In turn, Savills IM - ELF3 Fund decided to buy Panattoni A2 Warsaw Park (103,700 sqm) located in Grodzisk Maz. from Invesco Real Estate. 7R was also active in Q3, selling three of its warehouse parks, i.e. 7R Park Kowale II (52,000 sqm), to Generali Real Estate. At the same time, CBRE IM became the new owner of 7R Park Poznań East and 7R Park Sosnowiec (totalling over 44,800 sqm).
The strong investor appetite observed in Q3 2021 has resulted in further compression of yields, with big-box facilities valued at 4.5 - 5.0% and warehouse space at around 4.25% - 4.50%.
"The warehouse real estate sector is taking full advantage of its opportunity. After years of domination by office and retail properties, it is now at the forefront of foreign interest. Investors' greatest attention is focused on large multitenant warehouse hubs, which accounted for more than half of all transactions this year. The rapid development of the urban logistics segment, as well as the increased number of BTS projects, means that these assets are also increasingly being considered as good opportunities to monetise capital", says Renata Osiecka, Managing Partner, AXI IMMO.
Five major warehouse markets accounted for over 73% of total take-up in Q3 2021
From the beginning of July until the end of September this year, gross take-up in the Polish warehouse market amounted to 1.44 mln sqm (+16% y/y). During the period under review, tenants were most active in Warsaw (365,000 sqm), Upper Silesia (266,000 sqm), the Kuyavian-Pomeranian region (171,000 sqm), Lower Silesia (148,000 sqm) and Poznań (147,000 sqm). Transactions for logistics operators and e-commerce dominated the take-up structure in Q3. Both accounted for over 50% of take-up. The five largest transactions in Q3 2021 included the letting (new deal) of over 104,000 sqm by an international e-commerce company at Hillwood Bydgoszcz, followed by three logistics operators opting to sign new agreements for over 53,000 sqm at 7R Park Goleniów II, 34,000 sqm at Panattoni Park Głogów and 29,700 sqm at Segro LP Poznań Komorniki, respectively. In turn, a company from the tool industry signed a contract for 26,000 sqm at Segro Business Park Gliwice.
The total take-up volume from January to September 2021 in the Polish warehouse market amounted to 4.38m sqm, which translates into an increase of 25% year-on-year. The strongest occupier activity in the first three quarters of 2021 was recorded in Warsaw (944,000 sqm), Upper Silesia (816,000 sqm), Poznań (797,000 sqm), Lower Silesia (585,000 sqm) and Central Poland (487,000 sqm). New leases and expansions accounted for 75% of the take-up.
"We are on the best way to equal or beat last year's take-up result in the Polish warehouse market. Breaking the limit of 5.2m sqm is very realistic, which reflects in the excellent results for the first three quarters of this year and a 25% increase in tenant activity compared with last year's take-up rates. The development of e-commerce and supporting industries is driving the market. The activity of courier companies, which have announced that they will introduce same-day delivery services in selected cities by the end of 2021, should also be monitored closely. Nevertheless, we expect the greater regionalisation of supply chains to intensify trends such as nearshoring and cross-border", says Anna Głowacz, Head of Industrial Agency, AXI IMMO.
Record level of space under construction with the growing share of speculative projects
Developer activity in the Polish warehouse market in Q3 2021 amounted to over 660,000 sqm (5.6% y/y), which translated into an increase in the total stock of modern industrial and logistics space to 22.4m sqm. During the period under review, most new supplies were delivered in Western Poland (316,000 sqm), followed by Poznań (88,000 sqm), Lower Silesia (66,000 sqm) and Upper Silesia (61,000 sqm). In the case of Western Poland, a significant accumulation resulted from the completion of the Panattoni BTS project in Świebodzin (over 200,000 sqm of usable area) for Amazon. In the first three quarters of 2021, 1.77 million sqm of new space was delivered to the warehouse market, similar to the reference period a year ago. During the period under review, most new supplies were delivered in Western Poland (337,000 sqm), Upper Silesia (310,000 sqm) and Warsaw (259,000 sqm).
Good forecasts for the development of the warehouse market and high demand influence developers' robust activity. At the end of September 2021, there were 3.46 million sqm under construction, of which 35% is space built under the speculative model. The volume of developments without secured leases is 1.22 million sqm, increasing over 120% on last year. The largest warehouse parks under construction include GLP Lędziny (111,500 sqm), Hillwood Bydgoszcz (104,300 sqm), Panattoni Park Głogów (73,000 sqm) and two projects from 7R, i.e. 7R Mysłowice (50,770 sqm) and 7R City Flex Katowice II (41,100 sqm).
"In the next few months, we expect that the developers market will face some challenges related firstly to the securing and availability of investment land, secondly to rising labour costs and the extension by about 2-3 months of project implementation. Limited investment alternatives make it difficult to negotiate with investment landowners, who expect higher starting rates", adds Anna Głowacz.
The high level of development activity, together with continuing demand, is driving down vacancy levels. At the end of Q3 2021, there was around 1,129,000 sqm of available space in Poland as a whole, i.e. approx. 5.04% (-2.66 pp. y/y) of the total warehouse market stock. The highest vacancy rate among the analysed markets remains in Upper Silesia (7.6%), Central Poland (6.6%) and Warsaw (5.2%). There is virtually no space available for immediate lease in Szczecin and Eastern Poland. The relation of demand to supply did not significantly influence the changes in offer rents in the last quarter, which remained at the current level.
"We expect that in the coming months, the performance of the new supply in the Polish warehouse market will not differ significantly from the previous average. Nevertheless, one should bear in mind the increasing challenges related to the availability of investment land and the shortage of employees. The large volume of speculative investments should soon impact the adjustment of average rental rates and satisfy the rapid demand for space from the two most active tenant groups, i.e. e-commerce and logistics operators. On the other hand, at the threshold of activities connected with limiting the sector's impact on climate change, we forecast a deepening trend related to introducing green solutions to warehouses, in which certification will be one of the standards", sums Renata Osiecka.
