Annual volume of leased floor-space in 2018 was 3.7 million sq m. The market grew by a further 2 million sq m while nearly 2 million sq m of space is under construction. Last year also saw record-breaking total for industrial investment transactions - worth 1.84 billion EUR.
Advisory firm JLL summarizes the industrial market in Poland in 2018.
Demand - large appetite amongst tenants
The Polish industrial market once again came in with an excellent performance in 2018, giving investors cause for optimism for 2019. Total demand of 960,000 sq m transacted in Q4 boosted the annual volume of leased floor-space to 3.7 million sq m, the second best result in the sector's history. Net demand, i.e. not taking into account renewals, totalled 2.9 million sq m. A significant amount of new demand in 2018 was concentrated in the three largest markets, namely Warsaw, Upper Silesia and Central Poland, with a total of over 1.5 million sq m of space transacted in the three locations
Selected transactions in 2018
|Tenant||Park||Space (sq m)|
|Leroy Merlin||Panattoni BTS Piątek||124,000|
|Zalando||Hillwood BTS Olsztynek||121,000|
|Confidential tenant||Panattoni BTS Krzywe||61,000|
|Confidential tenant||Panattoni BTS Łódź||45,000|
|Arvato||Panattoni Park Stryków III||43,000|
Source: JLL, www.magazyny.pl, 2018
Once again, the most active tenants came from two sectors - logistics operators and retailers. The former leased more than 1 million sq m of new space during 2018, accounting for 35% of total net demand. The share of retailers was not much less, standing at 32%. Light manufacturing and the automotive sector together accounted for some 16% of total net take-up. These percentages should remain stable in the following quarters
Supply - developers still active
The buoyant performance of the leasing market was accompanied by excellent activity on the construction side. The market grew by another 2 million sq m, with more than 720,000 sq m being delivered in Q4 alone. This was undoubtedly the year of Central Poland. New completions there surged to more than 760,000 sq m, almost 40% of total new space delivered nationwide.
“It all adds up to an existing stock of 15.7 million sq m at the end of 2018, which is three times as much as ten years ago. The supply pipeline remains at a very healthy level. By the end of last year nearly 2 million sq m of new space remained under construction in Poland, most of which is being developed in Upper Silesia, which accounted for almost 420,000 sq m. The largest projects to be completed in the next few quarters are warehouses for e-commerce giants in Gliwice and Olsztynek”, says Maciej Kotowski.
The share of space being built on a speculative basis is 35%. Developers are keen to start such projects in the largest markets. Speculatively constructed floor space of more than 100,000 sq m was located in Warsaw, Upper Silesia and Wrocław.
Rents are rising, vacancy rates remain relatively unaffected
The relatively high levels of speculative development activity seen during 2018 did not result in changes in vacancy rates which averaged 5.3% in Poland. At the end of December 2018, the highest rates were in Warsaw Inner City (12%), Poznań (7%) and Białystok (36%), where the first partially speculative warehouse park was delivered in Q3 2018. There was no available space to lease in Kielce, Radom, and Lubuskie.
Rents remain on an upward trend. Warsaw Inner City continued to be the most expensive location, with headline rents ranging from €4.3 to €5.2 / sq m / month. In turn, the most attractive rents for big-box units are still found in out of town locations across Central Poland (€2.6 to €3.2 / sq m / month).
“In some of the most attractive locations one could see an increase in rents, especially in the case of effective values, i.e. taking into account the incentives offered by developers. This is mostly influenced by increasing construction costs and land prices”, explains Tomasz Mika.
Record-breaking industrial investments
Investment volume has been growing every year since 2015, when it was a mere 221 million EUR of transactions. The figure for 2016 was almost 770 million EUR and 900 million EUR in 2017.
In 2018, up to 90 parks with almost 3.2 million sq m of total space changed hands, representing over 20% of total existing stock in Poland. The value of industrial investment transactions reached an historically high 1.84 billion EUR, with a significant proportion accounted for by large portfolio transactions. As for next year, we expect the market to continue with a great deal of activity amongst investors, driven by both large portfolios and smaller, single assets. At the same time new sources of capital emerge, and investors open to counter-trend trading begin to be active
Major industrial transactions completed in 2018 included: the Encore (Hillwood) and Prologis portfolios, both acquired by Mapletree for 320 million EUR and 260 million EUR respectively; the Och-Ziff portfolio, bought by a JV between Griffin and Redefine for approximately 195 million EUR; the Azurite (Goodman) and Hines portfolios, acquired by Blackstone for approximately 190 million EUR and 140 million EUR respectively; as well as portfolio acquired by Tristan Capital Partners for ca. 100 million EUR.
Overall, prime warehouse yields in Poland stood at 6.5%, with exceptional, long-leased assets trading at around the 5.5% mark. The further yield compression is expected in the short-term perspective.