The forecast increase in domestic consumption, the expansion of manufacturing companies and the development of e-commerce are having a positive impact on the warehouse space rental market. In the first months of the year, demand increased by nearly 10 percent compared to the same period in the previous year and amounted to 683,000 sqm. Developers are showing no signs of slowing down, the effect of which was 425,000 sqm of new supply delivered to the market in the first quarter of 2016 and over 700,000 sqm under construction. 50 percent of the new projects under construction are speculative investments, which means that despite the low vacancy rate competition between developers is increasing – according to a summary of the first quarter of 2016 prepared by AXI IMMO.
In the first three months of this year, gross demand amounted to 683,000 sqm, of which new contracts and expansions accounted for 55 percent and contract extensions made up 45 percent. This is a new record for the opening of the year; compared to the first quarter of 2015 an increase of 60,000 sqm was recorded.
The best results on the demand side occurred in the major storage regions of the country, such as in the vicinity of Warsaw and in Upper Silesia, where 160,000 sqm and 142,000 sqm were leased respectively. The highest net demand was recorded in Upper Silesia.
In emerging markets, medium-sized transactions up to 5,000 sqm dominated. The exception was the 45,000 sqm BTS agreement for Kaufland in Bydgoszcz, which was also the largest new contract signed in the first quarter of 2016.
“The increase in domestic consumption and the progressive outsourcing of logistics services is reflected in the structure of demand, where the share of logistics companies in comparison to the beginning of 2015 increased and is almost 44 percent. Retailers were in second place with a share of nearly 15 percent,” commented Renata Osiecka, Managing Partner at AXI IMMO.
The total stock of modern warehouse space at the end of March was 10.3 million sqm. In the first three months of the year 425,000 sqm were put into use, constituting an increase of 53 percent year-on-year.
In the first quarter of this year, the largest increase in new supply took place in the Warsaw area, where within seven investments a total of more than 137,000 sqm were put into use. The second-placed region was Upper Silesia, followed by Central Poland, where new supply amounted to 87,000 and 85,000 sqm respectively.
The developer Panattoni Europe had the greatest impact on the high level of supply as it has the largest share of new supply and volume of investments under construction, including speculative projects.
“The large number of new projects under construction, including speculative projects, is having an impact on the warehouse market. Despite the low vacancy rate, effective rents are at their lowest level in years. The pace at which investments are being implemented and the market pressure from Panattoni is so high that developers are fighting for every quality tenant. Rents are the lowest in years. This is the best time to negotiate the terms of lease agreements,” said Renata Osiecka.
720,000 sqm are under construction, the greatest share of which is in Poznan with 158,000 sqm, followed by the Warsaw region with 110,000 sqm. Speculative investments account for more than 335,000 sqm. The share of speculative projects is increasing quarter to quarter and has grown 42 percent year-on-year. Most new projects without secured lease agreements are being built in Poznan (80,000 sqm) and Wroclaw (over 70,000 sqm).
Compared to the previous quarter, the vacancy rate increased by 1 percent to 5.8 percent. Most space available for immediate rent remains in the Warsaw area – 11.3 percent, followed by Lower Silesia – 6.3 percent. In the coming months, the vacancy rate will increase slightly against a background of growing supply.
Base rents in most regions in the first months of the year remained stable. Intense competition and activity among developers is reflected in effective rents. Developers are offering a wide range of exemptions and financial incentives to keep or obtain clients. For a long-term lease agreement it is possible to obtain a rate of less than €2.00 per sqm per month in all major markets.
The market is in a high growth phase, allowing for an optimistic outlook for the next months of the year. Risk factors that in the long-term may weaken the sector include the investment climate associated with the political situation and the effects of the new law on the sale of agricultural land.
