Demand: Poland as one of the most active leasing markets in Europe despite a 25% decline in take-up

"The first quarter of 2024 saw more than 870,000 sqm of industrial space transacted – this represented a year-on-year decrease of 25% and the lowest figure since the second quarter of 2019. However, Europe as a whole also experienced a double-digit drop in take-up of 22% year-on-year, so Poland remains one of the top-performing European markets for leasing activity despite a marked slowdown from previous years", explains Damian Kołata, Partner, Head of Industrial & Logistics Agency Poland, Head of E-Commerce CEE, Cushman & Wakefield.

An economic downturn and rising operating costs have been the main challenges facing the industrial market and other sectors, which saw many companies reorient their strategies towards optimising operations.

"Logistics companies were notably less acquisitive, accounting for 20% of take-up in the last six months compared to the usual average of 30-40%. This sector is, however, showing signs of heightened activity, but this will not translate into take-up figures until several months later", adds Damian Kołata.

Retail is a positive growth story of rising retail sales and the expansion of e-commerce. This, in turn, is fuelling strong demand coming from courier companies and the packaging sector. Despite a downturn in manufacturing, automotive and production companies remained active during the first quarter of 2024. Market sentiment is expected to improve in the coming quarters, but this year’s leasing activity is unlikely to match last year’s robust take-up of 5.58 million sqm.

Supply: the double-digit growth of the last nearly 10 years has come to an end

At the end of the first quarter of 2024, Poland’s total warehouse stock stood at 32.7 million sqm, up by 9.5% year-on-year. 75% of that total is concentrated in the country’s five core regions: Mazovia, Silesia, Łódzkie, Lower Silesia and Greater Poland.

"New warehouse supply in the January-March period amounted to more than 850,000 sqm, 86% of which was delivered to four markets: Lower Silesia, Pomerania, Greater Poland and Mazovia, which accounted for 32%, 20%, 19% and 15% of the total respectively", comments Adrian Semaan, Analyst, Cushman & Wakefield. 

The largest completions of the first quarter were Panattoni Park Poznań A2 (140,000 sqm, including 60,000 sqm for H&M), the second phase of Panattoni Park Wrocław Logistics South Hub (90,000 sqm) and another phase of GLP Wrocław V Logistics Centre (86,000 sqm) for an international e-commerce company.

"Development activity slackened slightly over the quarter, with approximately 2.32 million sqm under construction. Despite this, 2024 is expected to see 2.9 million sqm come on stream - this would represent the fourth-highest supply level in the history of the Polish industrial market", adds Adrian Semaan.

Speculative projects without pre-lets accounted for 49% of the development pipeline, down from 54% last year. The highest concentration of construction activity was in five core markets and in the vicinity of Gdańsk and Kraków.

"It is worth noting that smaller markets such as Bydgoszcz-Toruń, Szczecin and Rzeszów are also expected to see an uptick in development. By contrast, there are no projects underway in Lubuskie due to relatively high availability of warehouse space and muted demand from tenants with links to the German economy. Construction volumes are expected to shrink in the near term in Lower Silesia and Łódzkie", says Damian Kołata.

Rents: rental rates stabilise amid high supply levels

The overall vacancy rate has been on an upward trend since it fell to a historic low of 3.3% in early 2021. It currently stands at 8.2%, its highest since September 2020 (8.5%). High supply levels pushed warehouse availability up to 2.69 million sqm during the first quarter of 2024, with 416,000 sqm of new completions remaining vacant at the end of March. In addition, approximately 245,000 sqm was vacated by tenants who chose not to renew their leases.

"Net absorption in the first quarter of the year amounted to nearly 520,000 sqm, signifying an increase in physically occupied space almost on par with the 2017-2020 average of 530,000 sqm but well below the average of more than 850,000 sq m seen in 2021-2023", comments Adrian Semaan. 

Monthly headline rents for big-box logistics projects remain unchanged at €3.60-6.50 per sqm, with urban warehouses commanding €5.10-7.25 per sqm. Monthly effective rents are lower - €2.70-6.20 per sqm and €4.70-6.50 per sqm respectively. Rental rates are, however, likely to edge down in Łódzkie, Lower Silesia and Mazovia as a result of significantly increased warehouse availability.