With 2.32 million sqm of industrial and logistics space under construction, Poland is the top European market for development activity, says the latest quarterly report from BNP Paribas Real Estate Poland “At a Glance – Industrial and Logistics Market in Poland, Q1 2024”.
The industrial sector enjoys strong growth
The industrial development pipeline remains strong despite a decrease of approximately 0.49 million sqm from the fourth quarter of 2023.
“At the end of March 2024, Poland’s total industrial and logistics stock reached 32.7 million sqm, up by nearly 10 percent year-on-year. This represents the fastest pace of growth in Europe. Development activity continues with approximately 2.32 million sqm underway, marking a slight decrease from the previous quarter. The largest volumes of new space under construction are in the ‘Big Five’ markets and the vicinity of Gdansk and Krakow. Development activity is also gathering pace in smaller markets such as Bydgoszcz-Toruń and Szczecin,” says Martyna Kajka, Director of Industrial and Logistics, BNP Paribas Real Estate Poland.
The highest concentration of warehouse construction activity in the period January-March 2024 was in Lower Silesia (586,000 sqm), Central Poland (396,700 sqm), and Warsaw II (301,500 sqm). Meanwhile, the largest volumes of new warehouse space in the first quarter were delivered in Lower Silesia (272,000 sqm), Tricity (167,200 sqm), and Poznań (121,100 sqm).
A high new supply level as demand weakens
More than 850,000 sqm of new industrial and logistics space was delivered in Poland during the first quarter of 2024 – this represents an increase of over 270,000 sqm from the last quarter of 2023. Meanwhile, demand slowed in the first three months of 2024, which saw more than 870,000 sqm of industrial and logistics space transacted, down by around 25 percent from the same time in 2023. BNP Paribas Real Estate Poland notes that this was the lowest leasing volume since the second quarter of 2019. This decline is largely attributed to an economic downturn and a general increase in operating and financing costs. Demand for industrial and logistics space, however, weakened not only in Poland but also across the CEE region.
The strongest letting activity was recorded in Central Poland, with more than 178,000 sqm taken up in the Łódź region, and in Warsaw II, which saw 168,000 sqm transacted. Poznań came third with 165,000 sqm of leases. The largest transaction of the first quarter saw a retailer take 62,000 sqm in Hillwood Łódź II Chocianowice.
Vacancy rates are up again
Poland’s overall industrial and logistics vacancy rate has been on an upward trend since 2021 when it fell to an all-time low of 3.3 percent. In the period January-March 2024, it reached 8.2 percent, its highest level since September 2020 (8.5 percent), up by 1.7 pp year-on-year.
At the end of the first quarter of 2024, warehouse availability increased to 2.61 million sqm following the completion of 852,000 sqm of new space. The lowest vacancy rates of below 4 percent were in Tricity, Rzeszów, and Krakow, while the highest of over 10 percent were in central and western Poland, in Wrocław, Zielona Góra, and Gorzów Wielkopolski.
Warehouse developers expand their land banks
The report from BNP Paribas Real Estate Poland also notes that according to Poland’s new Zoning Act, existing zoning studies will be replaced by new general plans by 2025 – this means that no zoning plans can be amended by that date. Infill development areas which are expected to allow for specific types of projects will be a key element of such plans.
“Initially, the infill development area procedure was also to apply to warehouses to facilitate their construction, but the Polish government ultimately excluded warehouses from the list of developments subject to this procedure. As a result, new regulations will significantly hamper warehouse development in Poland, which is likely to affect the real estate and logistics markets, especially given the growing demand for warehouse space driven by e-commerce and logistics growth. Being concerned about the new regulations, developers are increasing their land banks,” says Robert Pawłowski, Director of Industrial and Logistics, BNP Paribas Real Estate Poland.
Warehouse developers have recently become notably acquisitive. CTP, for instance, has added 0.5 million sqm to its bank land, which comprises approximately 3 million sqm of land with active or pending building permits. In 2023, Satoia acquired approximately 1.2 million sqm for its land bank, most of which is manufacturing land. It is also planning to acquire another million square meters of land or more by the end of this year. Prologis has also recently expanded its land bank by more than 23 ha in Żabia Wola.
E-commerce gains momentum
Online retail sales in Europe as a whole are expected to increase by 42 percent between 2022 and 2027. GlobalData estimates that e-commerce in Poland will grow 38 percent by 2027, outpacing the rates of growth forecast for Belgium, the Netherlands, and Austria, with online sales reaching more than €24 billion. The growing popularity of e-commerce will translate into more deliveries and more investment in logistics networks and warehouse infrastructure in and near urban areas.
E-commerce continues to ride high. This is borne out by the performance of InPost, which delivered 589.5 million parcels last year, posting a 16 percent increase from 2022. And on 19 December 2023, it processed a record nearly 11 million parcels in a single day compared to 1 million in 2019 and just under 500,000 in 2016. This demonstrates that Polish people favour deliveries to parcel lockers, which is also important from the point of view of minimizing carbon footprint and reducing environmental impact.
