At the end of 2018, Poland’s industrial and warehouse stock reached 15.79 million sqm. Around 2.22 million sqm of modern warehouse and industrial space was delivered to the market last year, down by just 6 percent on 2017’s level. With 792,000 sqm constructed in the last 12 months, Central Poland reported a record-high development activity with large-scale completions for BSH, Media Expert and Smyk at Panattoni Central European Logistics Hub in Łódź (a total of 214,000 sqm), Hillwood BTS Zalando 1 in Głuchów (125,000 sqm) and Panattoni Park Stryków III (91,000 sqm). Other leading markets in terms of new supply were Upper Silesia (303,000 sqm), Wrocław (219,000) and Warsaw suburbs (205,000 sqm).
Occupier activity remained robust throughout 2018 with warehouse take-up reaching 3.98 million sqm, which represented a 2.5 percent decrease compared with 2017. New lease agreements and extensions accounted for approximately 76 percent of all deals. As in previous years, take-up predominantly came from logistics operators (36 percent), retail chains (16 percent), e-commerce (13 percent), manufacturing (9 percent) and the automotive sector (5 percent). As in 2017, the highest leasing volumes were recorded on three core markets: the Warsaw region (762,000 sqm), Upper Silesia (752,000 sqm) and Central Poland (602,000 sqm), accounting for 53 percent of total take-up. The largest leases were for BTS schemes, including Leroy Merlin’s 124,000 sqm at Piątek in Central Poland (Panattoni) and Zalando’s 120,000 sqm in Olsztynek (Hillwood). BTS projects made up approximately 30 percent of total take-up.
Developer activity also remained very strong with 1.92 million sqm under construction at the end of 2018; of that total, 69 percent was secured with pre-lets. The highest concentration of development activity is in Upper Silesia (488,000 sqm), Central Poland (295,000 sqm) and Warsaw suburbs (204,000 sqm). Most projects are being developed in out-of-town locations, near major transportation corridors, but development is also picking in the sector of urban warehouse parks for last mile logistics. Urban warehouse projects are required to bring down transportation costs and shorten delivery times to customers on the expanding markets of Warsaw, Wrocław, Łódź, Poznań, Gdansk and Szczecin.
Due to robust occupier demand and limited speculative developments, unoccupied space amounted to 796,000 sqm in December 2018, accounting for 5 percent of the nation’s total stock and bringing the overall vacancy rate down by 0.2 pp compared with the end of December 2017. Limited availability of warehouse space, healthy demand and rising construction costs pushed rents up on most markets in Poland. Rental growth amounted to around 10-15 percent compared to the previous year and was reflected in higher effective rents as developers had scaled down financial incentives.
However, most European markets are experiencing an upward trend in rental rates, helping the Polish logistics sector maintain its competitive advantage. Strong economic fundamentals, rising rents and longer average leases (signed for five rather than three years) coincide with the increased activity of foreign investment funds which in 2018 invested a record €1.84 billion in Polish logistics and industrial assets, up by 73 percent year-on-year.
Paweł Partyka, Associate, Capital Markets, Cushman & Wakefield, commented: “The logistics investment market has maintained an upward trend since 2014. The total investment volume in 2018 amounted to more than €1.8 billion. 2018 was a record year both in terms of the volume of transactions and in terms of growth dynamics compared to previous years, as last year’s investment volume rose by 73 percent in relation to 2017. The largest transaction in 2018 was the acquisition of the Encore portfolio for €321 million by Mapletree. German, UK, US and Asian investors remain the most important source of capital. Portfolio transactions and BTS schemes offering long-term stable income attract investor interest in particular.”
In 2019, the warehouse and industrial market will be driven by the expected further rapid growth of e-commerce, which will generate demand for modern warehouse space and logistics services required for fulfilment of online orders both in Poland and abroad. Given the record-low unemployment, decisions on where to locate will be increasingly challenged by labour availability and costs in the logistics sector.
Paweł Kopeć, International Account & Bid Manager, Randstad Polska, said: “2018 was the year of a rising wage pressure on practically all markets. Hourly rates of pay for blue-collar workers rose in the warehouse sector in each voivodeship with the strongest rises in Warsaw and Poznań. Poland’s eastern regions boast a strong labour potential resulting from a smaller number of employers and thereby a limited number of job offers. However, entrepreneurs’ interest in this part of the country remains subdued, partly due to the limited availability of warehouse and production space. Entrepreneurs, particularly large firms with more than 250 employees, are increasingly recruiting foreign nationals, especially from Ukraine and Belarus. In mid-2018, nearly a quarter of employers had overseas workers on board, but today this number is definitely higher. Recently, there’s been a lot of talk about a possible exodus of such workers once Germany opens its labour market, which could result in Poland’s lower GDP growth. Surprisingly, a hard Brexit is likely to avert this risk. According to recent simulations, it could lead to 100,000 jobs lost, particularly in the automotive industry. In this case, the German government’s priority would be to guarantee employment to those being laid off. Given the strong presence of the automotive sector in southern Poland, this scenario could have a major impact on the Polish labour market.”
Damian Kołata, Associate, Industrial and Logistics Agency, Cushman & Wakefield, said: “Media have been reporting for weeks about a possible large-scale migration of Ukrainian workers to Germany following the adoption of a new law which is expected to make easier taking up jobs in Poland’s western neighbour. The bill has been approved by the German government, meaning that in practice it will be some time before the new law takes effect, but if the parliament adopts it without any undue delay, the new regulations will not come into force until 2020.
“Although the German labour market will open to non-EU nationals, this does not mean that it will be possible to take up employment wherever there will be demand for workers. Quite strict requirements may be hard to meet; these will include appropriate university or vocational education and an employment contract necessary to obtain a visa with a work permit. Unlike the situation in Poland, where Ukrainian nationals benefit from simplified procedures and a minimal language barrier, they will need to complete many formalities and confirm professional qualifications to be able to start work in Germany. In addition, according to recent surveys, nearly eight out of ten Ukrainians are satisfied with working conditions in Poland and as many as 84 percent of respondents would recommend working in Poland to their family and friends.”
“The concerns of Polish entrepreneurs are theoretical considerations for the time being. Requirements set out in German legislation will be a major obstacle for a vast majority of foreign nationals who have already found employment in our country.”