The first quarter of 2023 witnessed a record supply of modern warehouse space which brought Poland’s total industrial stock close to 30 million sqm. Both construction and occupier activity slowed in the first three months of the year - when comparing to the historic peaks in 2021 and 2022. The growth of the Polish logistics and warehouse market will continue to be driven by the strength of e-commerce, say the authors of the latest quarterly report from BNP Paribas Real Estate Poland.
The Polish industrial and logistics market expanded by 1.89 million sqm in the period January-March 2023 - the highest supply on record. This volume accounted for 40% of last year’s total warehouse deliveries. Another notable development of the first three months of the year was an upward trend in vacancy rates, says the report. At the end of March 2023, Poland’s overall vacancy rate stood at 6.4%, its highest since the beginning of 2021, marking a year-on-year increase of 3.1 pp. The structure of take-up also changed, with renewals seeing their share rise from last year’s 27% to 45% at the end of March.
“Our observations have revealed that the strong development activity recorded in recent years resulted in an increase in warehouse availability. Despite the low absorption of newly built space, this is no cause for concern. The vacancy rate is rising but remains at a relatively moderate level. Our forecasts for the whole of 2023 suggest that the ratio of available stock will be slightly above 2022’s level,” says Tomasz Arent, Head of Industrial and Logistics, BNP Paribas Real Estate Poland.
Despite the record volume of warehouse completions, developers remain cautious about choosing new development sites, targeting prime locations and expecting at least half of a project’s space to be pre-let before commencing construction. With relatively low operating costs, Poland is still ranked high on the list of the most attractive destinations for industrial and logistics investment. Warehouse rents, electricity and labour costs in Poland are among the lowest in Europe.
E-commerce drives the market
Every third warehouse in Poland serves e-retailers. The strongest growth in warehouse space dedicated to e-commerce has, in recent years, been reported in such provinces as Lower Silesia, Lubuskie, Greater Poland and Silesia.
“Warehouse logistics continues its long-term and stable growth trend, driven by e-commerce. This is highlighted by developments along the S3 expressway in western Poland. E-commerce tenants are generally split into four key categories: pure online retailers, brick-and-mortar companies developing omnichannel strategies, logistics operators cooperating with e-commerce, and courier, express and parcel services companies,” says Martyna Kajka, MRICS, Director, Industrial and Logistics, BNP Paribas Real Estate Poland.
Construction is slowing
At the end of the first quarter of 2023, there was more than 2.1 million sqm of modern warehouse, logistics and industrial space under construction, down by around 1.25 million sqm compared to the fourth quarter of 2022. The highest concentration of development activity in January-March 2023 was in Central Poland, Upper Silesia and Poznań. The pre-let ratio averaged around 45%, indicating a downward trend over the quarter. The largest volumes of new warehouse space added to the Polish market in Q1 were in recorded in Warsaw II, Upper Silesia and Wrocław.
Rents up
According to experts from BNP Paribas Real Estate Poland, warehouse rental growth was seen in 2022 not only in Poland but also in many European markets. In Poland, it is attributed to the fact that the modern logistics market had, for many years, enjoyed stable and significantly lower rental rates compared to other European countries. “In 2022, headline rents in big-box projects rose by 20-30%. Rental rates remained flat but high in the first quarter of 2023,” says Tomasz Arent.
The market is gradually stabilizing
Although Poland’s warehouse development pipeline remained relatively strong in 2022, there was a slowdown in new construction starts, largely due to the worsened sentiment of investment funds and increased financing costs.
“We anticipate that the market will enter a phase of stabilisation in 2023, as indicated, for example, by a downward trend in steel prices which hit record highs in Q1 and Q2 2022. Furthermore, some economists forecast that the NBP’s reference rate will be cut from the current 6.75% by 0.25-1.25 pp by the end of 2023. This year is also expected to see increased activity from investors from Western Europe, the US and Asia for whom Poland remains one of the most attractive destinations in our region,” says Michał Rdzanek, Associate Director, Industrial and Logistics, BNP Paribas Real Estate Poland.
In Q2 2023, Poland, which continues to benefit from its geographical position, strong labour market and competitive warehouse lease costs, will join the ranks of the four largest European warehouse markets: the UK, Germany, France and the Netherlands – each with more than 30 million sqm of industrial stock.
Debuts and an expansion
In Q1 2023, Data4 launched its first data centre in Poland. The French-based company decided to locate its facility totalling 2,200 sqm of net area and offering 8 MW in Jawczyce near Warsaw. At full build-out, Data4’s campus will comprise four buildings with a combined capacity of 60 MW and cost around PLN 1 billion to deliver. Meanwhile, Dealz, part of the Pepco Group, opened its first distribution centre in Poland. The warehouse with an area of around 47,000 sqm is located in Łyszkowice near Łowicz.
Another highlight of the first quarter was the continuation of the efforts of Scandinavian real estate fund NREP to acquire a stake in 7R, Poland’s second-largest warehouse developer. Two years ago, NREP acquired Biuro Inwestycji Kapitałowych. If the Polish Office of Competition and Consumer Protection gives a green light to the 7R transaction, the Scandinavian investor is likely to become a leading market player, says BNP Paribas Real Estate Poland.