Industrial market sets new records in 2016
Favorable industrial market conditions in Poland continue with lease agreements for 3 million sqm signed in 2016. This is the best result in the market’s history. Advisory firm JLL summarizes 2016 on the industrial market in Poland.
Tomasz Olszewski, Head of Industrial CEE, JLL, said, “In 2016, demand on the industrial market in Poland hit an all-time high. Gross take-up was 3 million sqm out of which net demand amounted to 2.2 million sqm GDP growth and the gradually increasing importance of Poland as an e-commerce hub for Western Europe were also key factors in stimulating the growth in demand. This, coupled with one of the lowest rental costs in Europe and low interest rates, has enabled Poland to become one of the most sought-after industrial and logistics locations on the continent”.
In 2016, the most sought-after location was Warsaw Suburbs, where lease agreements amounted to 745,000 sqm. Interestingly, on the back of transactions by two e-commerce giants (Amazon and Zalando), which signed two leasing transactions for BTS projects totalling 291,000 sqm, the Szczecin region recorded a notable rise in tenant activity.
Last year, the vacancy rate on the Polish industrial market stabilized at 6.1 percent.
“It is worth pointing out that despite 1.2 million sqm of new space being delivered, the overall vacancy rate was not markedly affected, as a significant number of these projects were delivered in the BTS (build-to-suit) formula.
Overall the industrial space available for lease currently stands at approx. 700,000 sqm”, explains Jan Jakub Zombirt, Associate Director, Research and Consulting at JLL.
Among the major regions, Warsaw saw a fall in available space of 63,400 sqm despite the large amount of completions (217,500 sqm) in 2016. The Warsaw Suburbs, with a vacancy rate of just 5.5 percent, enjoyed the best result in its history. On the other hand, Poznań’s vacancy rate increased to 7.2 percent.
Growth in developers’ activity
Construction activity remained buoyant in 2016 as new warehouse and industrial stock increased by 1.2 million sqm and hit 11.2 million sqm by the end of the year. Developers were primarily focused on the markets of Upper Silesia (where 0.24 million sqm of new stock was delivered), the Warsaw Suburbs (0.21 million sqm), Central Poland (0.19 million sqm) and Poznań (0.18 million sqm). In 2016, Panattoni delivered the highest amount of new stock – 775,000 sqm.
Rents – stable
Over the last five years the major Polish industrial regions have displayed little or no change with regard to headline and effective rents (including discounts and incentives from owners). During 2016, headline rents remained stable in the Warsaw Suburbs (€2.7–3.6 / sqm / month), Upper Silesia (€2.7–3.5 / sqm / month), Poznań (€2.8–3.5 / sqm / month), Central Poland (€2.6–3.2 / sqm / month) and the Tri-City (€3.0–3.3 / sqm / month). Small falls of €0.1 to 0.2 / sqm / month were recorded in Warsaw Inner City and Wrocław. At the end of 2016 the most competitive regions with regards to effective rents were Upper Silesia (€1.9–3.1/ sqm / month), the Warsaw Suburbs (€2.0–2.8 / sqm /month), Central Poland (€2.0–2.8/ sqm / month) and Poznań (€2.1–3.0/ sqm / month).
Industrial land – infrastructure is the key
In 2016 developers’ attention with regards to securing new locations for industrial projects was mainly focused on regions and cities which have benefitted (or will soon benefit) significantly from the completion of new infrastructure projects.
Investment transactions – at an all-time record high in 2016
“In 2016, the volume of industrial investment transactions amounted to approximately €770 million. This is the best result in the market’s history. The biggest transactions included a P3 platform purchase by GIC, the Hillwood portfolio acquired by CBRE GI, the NBGI portfolio purchase by Hines REIT, and GLL’s acquisition of Amazon Fulfillment Centre in Poznań. Interestingly, taking into account ongoing portfolio deals we can expect that 2017 will set another investment record in the industrial market”, comments Tomasz Puch, Head of Office and industrial Investment, JLL.
Ownership continues to be highly concentrated: at the end of 2016 the top five players (Prologis & JV partners, SEGRO & JV partners, Panattoni & JV partners, Blackstone/Logicor, and Goodman) together controlled 56 percent of the stock in Poland.
The record activity by both tenants and developers in 2016 allows for cautious optimism in 2017, provided the overall economic environment remains strong. Despite the significant new pipeline scheduled for delivery in H1 2017, the overall vacancy rate shouldn’t be negatively affected, as at the end of 2016 75 percent of new projects had already been secured by pre-lease agreements. Major regions are again expected to attract the lion’s share of market activity.
Press Release by JLL.