Report - the warehouse market in Q1 2018 - Gerald Eve

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Report - the warehouse market in Q1 2018 - Gerald Eve
Report
– the warehouse
market in Q1 2018
A record amount of warehouse space
                                                                                                     Gross demand
is under construction in Poland.                                                                       1.16
                                                                                                       mln sq m

The Polish warehouse market remains in very good shape.
                                                                                    Net demand

The demand side saw a record-breaking start of the                             812,000 sq m
year for the third time in a row. From January to the end

of March 2018, 1.16 million sq m of modern warehouse
                                                                                                      New supply
space was leased, 20% more than in Q1 2017. Developers
                                                                                                 314,000 sq m
completed 314,000 sq m, but almost 2 million sq m are

under construction. Developers unwillingness to build
                                                                                Under construction
speculative investments resulted in a low vacancy rate,
                                                                                     1.98
                                                                                     mln sq m
which at the end of March this year was 4.2%.

                                                                                                       Vacancy*

                                                                                                      4.2%

                                                                                      Rents

                                                                                                                     Compared to the Q1 2017
                                                                                                                    *Compared to the Q4 2017

Axi Immo Group Sp. z o.o.         18 Twarda St. 00-105 Warsaw   + 48 22 111 00 01   office@axiimmo.com                  www.axiimmo.com
Report - the warehouse market in Q1 2018 - Gerald Eve
Demand

 Y
       et another first-quarter record was broken this                                                             Worth noting is the further development of new

       year with 1.16 million sq m of modern warehouse                                                             warehouse locations in Eastern Poland and Western
space being leased, of which new lease agreements and                                                              Poland. Improved infrastructure, in particular the
expansions accounted for more than 70%. This result is                                                             completion of sections of the S8 and S7 expressways,
20% higher compared to the same period last year. In just                                                          combined with a relatively greater availability of staff has
3 years, demand in the first quarter has grown by 86%.                                                             created higher interest among investors in new locations

                                                                                                                   in the Warmia-Masuria and Podlasie provinces. The best
From January to the end of March this year most new                                                                examples are Zalando’s 130,000
                                                                                                                                          ​​      sq m investment being
lease agreements were signed in Central Poland, where                                                              built near Olsztynek in Warmia-Masuria and Panattoni park
236,000 sq m were leased, of which new lease agreements                                                            in Białystok.
accounted for nearly 94%. Warsaw came second with over

200,000 sq m, followed by Wrocław with 172,000 sq m. In                                                            Demand is dominated by logistics companies (32%),
Central Poland, Leroy Merlin’s transaction for 124,000 sq                                                          followed by retail chains (21%) and e-commerce (19%).
m was the main reason for the high result. Wrocław and                                                             These are the three main drivers of demand, the increase
Poznań had the largest share of lease extensions.                                                                  in which is directly related to high levels of consumption in

                                                                                                                   Poland and Europe as well as changes in sales models and

                                                                                                                   new supply chain organisation.

Demand in regions in sq m Q1 2018
    sq m
 250 000

 200 000

  150 000

  100 000

  50 000

       0
             Central Poland

                                         Warsaw Suburbs

                                                          Wroclaw

                                                                    Eastern Poland

                                                                                     Upper Silesia

                                                                                                     Poznan

                                                                                                                  Tri-City

                                                                                                                             Krakow

                                                                                                                                      Szczecin

                                                                                                                                                 Warsaw Inner City

                                                                                                                                                                     Western Poland

                                                                                                                                                                                      Torun/Bydgoszcz

                                                                                                                                                                                                          Others

                              New agreements
                              Renewals                                                                                                                                                          Source: Axi Immo, Q1 2018

                                                                                                              2
The biggest lease transactions in Q1 2018

   Tenant                                        Property                                                                              Region                                    Type of contract           Leased space (sq m)

   Leroy Merlin                                  BTS Panattoni                                                                         Central Poland                            New deal                   124,000

   Zalando                                       BTS Hillwood                                                                          Eastern Poland                            New deal                   121,000

   Arvato                                        Panattoni Park Stryków III                                                            Central Poland                            New deal                   43,000

                                                                                                                                                                                                                  Source: Axi Immo, Q1 2018

Supply

 T
       he total supply of modern warehouse space at the                                                                                                         sq m), followed by the Warsaw area (40,000 sq m) and

       end of the first quarter 2018 was nearly 13.9 million                                                                                                    Upper Silesia, Szczecin and Western Poland (32,000 sq m
sq m; by the end of 2018 it will exceed 15 million sq m.                                                                                                        each).
From January to the end of March this year, only 314,000

sqm were completed, 34% fewer than in the same period                                                                                                           However, an impressive 1.98 million sqm are under
last year, which was mainly due to breaks in construction                                                                                                       construction. This is the effect of high demand from the
because of low winter temperatures. The largest amount                                                                                                          last two quarters, including the signing of contracts for
of space was completed in Central Poland (over 150,000                                                                                                          over 100,000 sq m of BTS investments for the e-commerce

Space under construction at the end                                                                                                                             Projects under construction
of Q1 2018                                                                                                                                                      – percentage share in the regions
   sq m                                                                                                                                                         by the end of Q1 2018
500 000

                                                                                                                                                                 Central Poland
                                                                                                                                                                 Upper Silesia
400 000
                                                                                                                                                                 Warsaw
                                                                                                                                                                                                     1%
                                                                                                                                                                 Eastern Poland
                                                                                                                                                                                                   1%
300 000                                                                                                                                                          Western Poland                   2%
                                                                                                                                                                 Tri-City                       3%
                                                                                                                                                                 Wroclaw                      5%           23%
200 000                                                                                                                                                                                  6%

                                                                                                                                                                                    6%
100 000
                                                                                                                                                                                         9%
                                                                                                                                                                                                            19%
                                                                                                                                                                                               10%
      0
             Central Poland

                              Upper Silesia

                                              Warsaw

                                                       Eastern Poland

                                                                        Western Poland

                                                                                         Tri-City

                                                                                                    Wroclaw

                                                                                                              Poznan

                                                                                                                       Szczecin

                                                                                                                                  Kielce

                                                                                                                                           Krakow

                                                                                                                                                    Opole

                                                                                                                                                                 Poznan                              13%
                                                                                                                                                                 Szczecin
                                                                                                                                                                 Kielce
                                                                                                                                                                 Krakow
                                                                                                                                                                 Opole

                                                                                                                           Source: Axi Immo, Q1 2018                                                              Source: Axi Immo, Q1 2018

                                                                                                                                                            3
and retail sectors. Currently, Central Poland is the largest                                                        though, investments that were already 30-40% leased

construction site in the country, where 462,000 sq m are                                                            before construction have space not secured by rental

being built. This is followed by Upper Silesia (386,000                                                             agreements. However, their willingness to take risk with

sq m) and Warsaw (258,000 sq m). With nearly 2 million                                                              an entirely speculative projects (100%) is limited on both

sq m, speculative space makes up 25%. In most cases,                                                                main markets and new locations.

Stock and vacanacy rate at the end of Q1 2018

4 000 000                                                                                                                                                                                                               8%

3 000 000                                                                                                                                                                                                               6%

2 000 000                                                                                                                                                                                                               4%

1 000 000                                                                                                                                                                                                               2%

        0                                                                                                                                                                                                               0%
             Warsaw Inner City

                                           Warsaw Suburbs

                                                            Upper Silesia

                                                                            Central Poland

                                                                                             Poznan

                                                                                                      Wroclaw

                                                                                                                       Tri-City

                                                                                                                                       Krakow

                                                                                                                                                Torun/Bydgoszcz

                                                                                                                                                                  Szczecin

                                                                                                                                                                             Eastern Poland

                                                                                                                                                                                                       Western Poland
                                 Existing space (sq m)
                                 Vacancy rates (%)                                                                                                                                            Source: Axi Immo, Q1 2018

Vacancy rates                                                                                                       Rents

  T                                                                                                                  D
       he average vacancy rate at the end of March this                                                                           ue to higher investment costs, rental rates are

       year dropped to 4.2%; however, in some large                                                                               maintaining their upward trend in most locations.

markets it increased. There is low availability or a lack of                                                        Despite the increase in headline rents, developers are still

ready space in new locations and young markets, where                                                               offering the lowest effective rates in the Warsaw area

there is no speculative development and the number of                                                               starts from EUR 1.9/sq m. An upward trend is clearly visible

new investments is limited. The highest vacancy rates are                                                           in Wrocław and Upper Silesia, while rents are stable in

in the Poznań region (7.5%) and Kraków (7.3%). A slight                                                             Central Poland. Despite the increase in rental rates in the

increase can be observed in existing facilities from which                                                          warehouse sector in Poland, compared to Germany and

tenants have relocated to newly built warehouses.                                                                   other western Europe markets, they remain competitive.

                                                                                                                4
Effective rents in regions (EUR/sq m/month) in Q1 2018

      6

      5
              4.40

      4
                                                                                                                                                                          3.40
              3.60                            3.00                                3.00                           3.10
      3                                                           2.80                                                                  2.90       2.90                                    2.80
                                                                                                   2.60                     2.60

                                                                                                                2.40                    2.40                              2.50             2.50
      2                                                           2.10                             2.10                     2.20                   2.20
                                              1.90                                1.90

      1

      0
               Warsaw Inner City

                                               Warszawa Suburbs

                                                                  Upper Silesia

                                                                                  Central Poland

                                                                                                   Poznan

                                                                                                                 Wroclaw

                                                                                                                             Tri-City

                                                                                                                                        Szczecin

                                                                                                                                                    Bydgoszcz and Torun

                                                                                                                                                                          Eastern Poland

                                                                                                                                                                                           Western Poland
                                   Effective rents (EUR/sq m)                                                                                                             Source: Axi Immo, Q1 2018

Forecasts

  T
          he market is in peak condition and excellent                                                          The low availability of staff in the main logistics hubs

          economic indicators mean that the forecasts for                                                       means that large e-commerce and production investments

the warehouse market for the remainder of the year are                                                          will go to the eastern part of the country, where staff

optimistic. If demand indicators and the pace of new                                                            availability is higher, and infrastructure is getting better.

investment remain at similar levels, we can expect last                                                         Large markets will continue to develop due to their scale

year’s record of 3 million sq m leased over 12 months to                                                        and the number of businesses already present in those

be broken.                                                                                                      regions.

This year will also see greater activity among developers                                                       Warehouse products are very popular with investment

in the Small Business Unit warehouse segment. This comes                                                        funds, which is further strengthening developers’ appetite

as a response to demand from tenants who are increasing                                                         for starting new investments. The highest returns on

efficiency and shortening to a minimum delivery times to                                                        investment can be achieved on warehouse real estate.

the end customer.

                                                                                                            5
Contact
Anna Głowacz
Head of Industrial - Leasing Agency

+48 797 420 950
anna.glowacz@axiimmo.com

Monika Rykowska
PR & Marketing Director

+48 725 900 100
monika.rykowska@axiimmo.com

Barbara Szymańska-Wieczorek
Industrial & Research Coordinator

+ 48 885 777 111
b.szymanska-wieczorek@axiimmo.com

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of any errors in order to correct them.

Axi Immo Group Sp. z o.o.                       18 Twarda St. 00-105 Warsaw                     + 48 22 111 00 01   office@axiimmo.com                    www.axiimmo.com
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