The overall volume of lease transactions in the Polish industrial sector in H1 2024 was 2.7 million sqm. This result was primarily based on extensions, which accounted for around 40 percent of the contracts signed. The high take-up rate is a positive indicator of the market’s performance. With high take-up, supply is maintained by gradually applying the brakes. Between January and the end of June 2024, developers maintained the market’s year-to-date growth rate of over 10 percent year-on-year (33.5 million sqm), delivering around 1.6 million sqm of new industrial and logistics space. Moderate new supply and a resurgence in take-up resulted in vacancy and headline rental rate stability. AXI IMMO has released its latest analysis, ‘Polish Industrial Market H1 2024’.
Investment: The market is coming to life
At the end of June 2024, the industrial market in Poland accounted for €294 million (17 percent of the total), a 33 percent decrease compared to H1 2023. Of the 11 transactions concluded in H1 2024, the largest was the acquisition of Panattoni Park Poznań XI by EQT Exeter (129,400 sqm) in Q2 2024, while the second was the purchase of two neighbouring parks, West Park Pruszków and West Park Ożarów (totaling 81,900 sqm) by Hillwood from DWS/RREEF in Q1 2024.
Grzegorz Chmielak, Head of Valuation and Capital Markets at AXI IMMO, comments: “Industrial and logistical assets continue to interest investors, particularly in the context of big box multi-tenant ventures. We see a situation in which developers are significantly more likely to opt to acquire existing buildings due to high construction costs and difficulty financing new projects. Despite lower investment activity than in prior years, the market is gradually rebounding. Reducing inflationary pressures and the ECB’s interest rate drop may reinvigorate transactions and encourage new players to enter the Polish market. On the other hand, investors are cautious, selecting projects carefully and ready for greater acquisitions next year.”
Take-up: Rebound with a high share of renewals
In the first six months of 2024, the total lease volume in the Polish Industrial market amounted to 2.7 million sqm (+23 percent y-o-y), with a 39 percent share of lease renewals. The result for renegotiations increased by 26 percent year-on-year. On the other hand, 1.7 million sqm (+22 percent y-o-y) was signed in purely new contracts (net take-up). The three most active provinces were Dolnośląskie (nearly 527,000 sqm), Mazowieckie (506,000 sqm), and Śląskie (469,000 sqm). The so-called ‘big five’ continue to dominate the Polish industrial market. In the first half of 2024, they collectively accounted for 81 percent of gross take-up in the Polish market. Among the largest lease transactions between January and June 2024 was a new contract signed by a retail company in Bydgoszcz Białe Błota LC in Kujawsko-Pomorskie Voivodeship for 103,800 sqm, while in Dolnośląskie, a 3PL decided to extend and expand an existing contract in Prime Logistics Wrocław Pietrzykowice (98,700 sqm). The third-largest was a new contract, under which an e-commerce tenant will move into Panattoni Wrocław Logistics South Hub for 91,000 sqm.
Anna Głowacz, Head of Industrial at AXI IMMO, points out: “New warehouse projects are presently more expensive than existing facilities due to rising investment expenditures, particularly in building costs, compared to prior years. Furthermore, in the face of personnel shortages, tenants prefer to remain in their current sites to maintain their existing workforce. Nonetheless, we are witnessing a positive trend in the form of an increase in rented space due to both new leases and the growth of current companies.”
Supply: Normalization in developer activity
At the end of June 2024, 1.6 million sqm (-37 percent y-o-y) of new supply brought the total stock of modern industrial space to 33.5 million sqm (+10 percent y-o-y). The highest developer activity in H1 2024 was recorded in Dolnośląskie (423,000 sqm), Pomorskie (239,000 sqm), and Mazowieckie (235,000 sqm) provinces. The largest warehouse parks delivered included CTPark Gdańsk Port (119,400 sqm), Panattoni Park Wrocław Logistics South Hub (90,000 sqm), and GLP Wrocław V Logistics Centre (86,200 sqm). At the end of June 2024, there was almost 2 million sq m (-6.2 percent y-o-y) under construction, with the largest amount in Dolnośląskie (568,000 sqm), Mazowieckie (410,000 sqm), and Łódzkie (322,000 sqm) Voivodeships. Around 45 percent of the new supply currently under construction is speculative. Moderate development activity and higher take-up in H1 2024 stabilized the vacancy rate at 8.3 percent (+160 bps y-o-y). The highest vacancy rate is in the Lubuskie Voivodeship (19.3 percent), followed by the Świętokrzyskie Voivodeship (16.1 percent) and the Łódzkie Voivodeship (10.8 percent).
Rents: Declines in effective rates in selected regions
At the end of June 2024, average headline rents remained stable in most locations. Landlord expectations in big-box developments fluctuate between €3.6 and €5.5 sqm/month. The most attractive base rents, below €4.0 sqm/month, are obtainable in selected projects in Piotrków Trybunalski, Stryków, the vicinity of Poznań, and Warsaw. The highest headline rental rates apply to projects in Warsaw and Kraków, above €5.0 – 6.0 sqm/month. A slight downward trend in effective rates of 15 percent to 25 percent is visible in selected highly competitive markets. In contrast, owners’ expectations are, on average, 10-15 percent higher in projects under construction and planned developments than in the offer available in older facilities.
Renata Osiecka, Managing Partner at AXI IMMO, concludes: “Despite a slower consumer recovery and a reduction in output, Poland’s industrial market will grow gradually in the second half of 2024. Extending leases in current locations will continue, although client development will be selective. We expect the end of 2024 to offer even greater optimism on the take-up front. On the supply side, we anticipate that developers will choose projects with pre-leases over speculative space. On the other hand, ongoing due diligence processes point to increased transactions in the investment sector in the coming quarters.”
