Despite the economic turbulence caused by the outbreak of a global pandemic, Poland’s warehouse property market put up a strong performance in H1. The prospects for the sector remain positive. By Adam Zdrodowski
This year has – perhaps a bit surprisingly when one takes into account the number of businesses hit hard by the coronavirus crisis – so far been a very good period for the Polish logistics property market with experts expecting the market to continue to hold its own in the months to come. Unlike some of the other commercial real estate sectors in the country, the industry not only proved largely resilient to the Covid-19-induced slowdown, but it actually attracted a record amount of tenant interest in the first two quarters of 2020.
Approximately 2.4 million sqm of warehouse and industrial space was leased across Poland in H1, which marks a 25 percent increase year-on-year (y/y), according to Savills data. The figure also represents an all-time high when it comes to historic January-June logistics take-up volumes recorded in the country. New agreements and expansions (net take-up) accounted for the bulk of the volume with renegotiations having covered around 600,000 sqm. The highest lease levels were seen in Warsaw, central Poland and Silesia.
At the end of H1, the vacancy rate stood at 6.6 percent, which was 1.5 percentage points more than a year before. Interestingly, the market witnessed more leasing activity in Q2 than in Q1, which well demonstrates its resilience to the disruptions caused by the Covid-19. However, the uncertainty in the economy at large did have an impact on the warehouse space leasing patterns in the first half of the year with analysts talking of a rising popularity of short-term (below one year) commitments.
Aversion to risk could also be found on the supply side. Cushman & Wakefield data show that developers completed over 1 million sqm of new space in the January-June period, which brought the total existing stock to almost 20 million sqm. At the end of Q2, projects covering a total of 1.9 sqm million of the new area were under construction, which still reflected intense development activity but also marked a drop from the more than 2.2 million sqm recorded a year earlier.
Most of that space was located in Silesia, the Warsaw area and western Poland. Notably, some 60 percent of the under-construction volume was covered by lease transactions – this means that developers have in recent months become less ready to launch speculative schemes. In the second quarter of this year, developments totaling approximately 350,000 sqm came under construction with the figure representing significant y/y (by a third), and q/q (by half) decreases.
What will the coming months bring? In spite of the solid H1 results, analysts refrain from forecasting that the entire year 2020 will be a record year for the warehouse property market. They point out that such industries as the automotive and production sectors have suffered losses caused by the pandemic. On the other hand, however, there are also positive signals from the market as businesses gradually learn to adapt to the new situation. Besides, the Polish market still has assets that are highly attractive from foreign companies’ perspective. “The long-term outlook for the Polish industrial market remains very positive. Poland is likely to benefit from, among other things, the expected drive of global manufacturers to geographical diversification,” argues Kamil Szymański, the head of the industrial agency at Savills. In his opinion, new companies may decide to enter Poland in the near future, attracted by the size of the Polish market, the relatively low logistics costs and the growth of the e-commerce sector.
For now, the continued investor interest in warehouse properties in Poland seems to be one of the best indicators of the sector’s strength and good prospects for the future. In the first half of this year, the warehouse and industrial property market attracted investment transactions valued at a combined €1.15 billion, an almost 155 percent increase y/y. Experts explain that the boom in the e-commerce sector, which the coronavirus pandemic has helped accelerate, is increasingly turning investors’ attention to warehouses as a relatively safe and promising asset class.