What's in store

Poland's warehouse market is booming, with the current stock of modern warehouse space offering a total of 3.15 million sqm - a growth of 43 percent year-on-year. According to some reports, a further one million sqm of warehouse space is under construction. Experts say its strategic location and fast-growing economy are among the main reasons for rising demand, giving Poland the potential to be the next big thing on the European market for logistics space.

In terms of attractiveness as a warehouse location, experts say Warsaw still surpasses other Polish cities, but changes on the market mean the capital is losing its leading position. According to the Colliers report International Polish Warehouse Market - 1H 2007, Warsaw accounts for around 52 percent of the country's stock of modern high-class warehouse space (almost 1.7 million sqm), while only two years ago the capital boasted about 80 percent. In the course of the past 12 months, 700,000 sqm of new space has been delivered in Poland, of which only 15 percent was in Warsaw. Due to a shortage of available land, Warsaw's zone 1 (which extends in a radius 10 km from downtown Warsaw) had only 4.5 percent of the deals signed in H1 2007. Meanwhile, zone 2 (extending 20 km further) dominated the market in H1 2007 with 55 percent, while zone 3 (the areas 30-50 km from the city center) accounted for 40 percent of the signed deals.

Stocking up

In the meantime, other cities are successfully delivering new space and attracting high-profile tenants. In Poznań, some 117,000 sqm was delivered in the Q1 period. In one high-profile deal, Panattoni signed a contract with H&M for over 50,000 sqm in its Poznań facility.

In Wrocław, Prologis delivered its Prologis Park Wrocław I and Prologis Park Wrocław IV in the first half of the year, contributing 340,000 sqm to the market. "Since 2005 we've been observing an increasing interest of our customers in Wrocław ... We own three logistics parks there. Each is 90-percent occupied, and we are building another one," says Maciej Madejak, Prologis Poland's vice president. Currently, there is some 700,000 sqm of warehouse space under construction in Wrocław.

Other regions are seeing significant developments as well. Prologis, one of the biggest developers in the Polish market with a 30 percent share, has announced a project in Szczecin, a city which will soon boast 228,000 sqm of total warehouse space. Prologis and Biuro Inwestycji Kapitałowych are also building in Gdańsk, where 46,800 sqm is to be delivered.

In September this year Europolis will deliver a 43,000-sqm warehouse in Piotrków Trybunalski, 47 km south of Łódź. Upon its completion in 2014, the Europolis Technology Park will offer 500,000 sqm of space. "We have already signed the first contract with Rossmann for 10,000 sqm," says Bartłomiej Hofman, managing director of Europolis Real Estate Asset Management. The central location of the warehouse complex is also expected to attract companies from outside Poland.

Another city showing promise is Katowice. "Katowice is undoubtedly a very fast-growing city. An advantage of this region is the close proximity of manufacturing investments, and particularly those in the automotive sector," says Maciej Chmielewski, associate director at Colliers.

Even though 70 percent of the new projects are outside Warsaw, the capital still has plenty of investors. Currently some 290,000 sqm of warehouse space is under construction in the capital area. In Q1 2007, 6.3 percent more warehouse space was leased in the capital than in the analogous period a year before, according to Rafał Bochenek, country manager for Poland at Goodman Real Estate.

Heading East or West?

Despite such bright prospects, rising markets such as Romania and Bulgaria could challenge Poland's position. These countries have become especially attractive for investors after their accession to the EU. The Goodman report also stresses the increasing interest in Ukraine and Russia. "Lots of Western companies are choosing Ukraine,because of its large population and low labor costs, which might take some investments from Poland," says Colliers' Chmielewski.

In terms of investments, 2007 will be an excellent year for Poland and the European market, which, according to the Goodman report, will enjoy R20 (zł.75.5) billion in capital as logistics becomes an even more popular alternative asset choice. Last year, some R19 (zł.71.7) billion was invested in logistics around Europe - nearly double the 2005 figure. Experts at Colliers, however, say that in Poland it is still difficult to find high-quality property to buy.

Highway to success

Experts say that the levels of supply and demand in Poland indicate a thriving warehouse market. In general, the vacant space in Poland's provinces stands at around five percent, while in Warsaw, vacancy is twice as high. Analysts expect a slight increase of the vacancy rate by the end of the year. However, considering the high demand (contracts for 550,000 sqm were signed in H1 2007), the market should not feel the effects of oversupply. "The level of demand should be satisfied by the existing space and upcoming projects. Given the strength of the Polish economy, companies are growing faster and this will feed through to demand on the warehouse market," says Chmielewski.