The warehouse sector has posted another successful six months for the first half of 2019. High, stable demand at 1.8 million sqm was the result of high activity in the logistics sector. On the supply side, developers are building without pause and are not afraid to invest in speculative projects. In the first six months of this year, nearly 1 million sqm were delivered on the market and further 2.3 million sqm were under construction at the end of June – these are the main conclusions from the latest report prepared by the consulting company AXI IMMO.
Demand: Large transactions for the logistic sector fuel demand
From January to the end of June 2019, more than 1.8 million sqm were leased, of which new lease agreements accounted for 66 percent. Although this result is 18 percent lower compared to the first half of 2018, no signs of a slowdown in the sector are visible yet. Stable demand is the effect of still high internal consumption, including further increases related to e-commerce.
The best results were achieved by the five main warehouse and production hubs, which accounted for 89 percent of demand in the first half-year. The most space was leased in the Warsaw region (550,000 sqm). This result is 70 percent higher compared to the same period last year and is the result of several large logistics investments and an increase in the number of contracts related to last mile logistics in the cities. Lower Silesia came in second with over 330,000 sqm of leased warehouse space. Then Central Poland and Upper Silesia with a demand of 300,000 sqm in each of these regions.
“It is worth noting the very good result of Lower Silesia, where the high activity of companies already present in the region as well as new entrants is visible. Over 90 percent of contracts were new lease agreements. Lower Silesia has many advantages that favour the development of the sector, including its convenient location for international distribution, the availability of land, quite strong industry and the absorbent consumer market in Wroclaw,” explains Anna Głowacz, Head of Industrial at AXI IMMO.
In the last six months we observed high activity among logistics operators, who rented the most space to service large contracts. Their share in the demand structure was 46 percent. Retail chains and production companies were in second place with a share of 11.5 percent and 11 percent, respectively.
Supply: High over 50 percent share of speculative projects
Total supply of modern warehouse space at the end of June this year amounted to over 16.8 million sqm. Developer activity is at a high level, with 1 million sqm delivered on the market since the beginning of the year, which is 65 percent more compared to the same period last year. The high half-year result on the supply side is the result of a large number of investments started in the last quarter of last year.
Most new space, over 220,000 sqm, was delivered in Central Poland, followed by over 125,000 sqm, in Warsaw and in Lower Silesia. Eastern Poland and Szczecin stood out among the new markets, where in total over 235,000 sqm were commissioned.
The forecast presented by AXI IMMO’s experts in Q1 2019 report came true, as a result of high development activity, the total stock of warehouse space in Central Poland exceeded supply in Upper Silesia.
According to an analysis carried out by AXI IMMO experts, 2.3 million sqm of warehouse space was under construction at the end of June. Upper Silesia remains the largest construction site, where developers within 14 investments are building 587,000 sqm, of which 210,000 sqm are in the BTS project for Amazon in Gliwice. Next are Central Poland (471,000 sqm) and the Warsaw region and Upper Silesia, where over 420,000 sqm of modern warehouse space are being built in each of these regions.
“The high number of investments under construction is also the result of speculative investments, whose share at the end of June this year was over 50 percent. This is an increase of 22 percent compared to the end of the first quarter of this year. In most cases, developers, after signing the first pre-let agreement, begin construction with a large speculative component,” comments Anna Głowacz.
Vacancy rate: The main markets with the highest space availability
At the end of June 2019, the average vacancy rate was 5.0 percent, which means an increase of 0.3 of a percentage point compared to the vacancy rate at the end of March this year. The highest increases in vacancy rates during the second quarter were in Central Poland, where at the end of June this year 9.2 percent of the region’s stock was immediately available. In addition, more than 7 percent was available in Poznan (7.6 percent) and in Upper Silesia (7.5 percent).
Headline rents still with upward trend
Rental rates in most warehouse locations in the past six months showed a further slight upward trend, especially in terms of headline rents, both in the main markets and in newly opened projects. Average rents for logistics space ranged from €2.8 to €3.7 per sqm, while for city investments they even reached €5.4 per metre. The best chance of obtaining attractive effective rents still exist in the Warsaw and Poznan regions.
Forecast: Total stock with more than 18 million sqm at the end of the year
The warehouse market will remain in good shpe in the second half of the year. At the end of the year the total stock of modern warehouse space in Poland will reached 18 million sqm. Demand should remain stable and at least 3.5 million sqm should have been leased by the end of 2019. The trend of adapting supply chains for e-commerce will continue.
In terms of warehouse space availability, we can expect a periodic increase in availability due to the commissioning of speculative projects and the relocation of logistics companies, especially in Central Poland and Upper Silesia. Rental rates will remain stable up to the end of the year, especially in the main markets, where high competition among developers persists.
