Savills: Warehouse market red-hot as never before

The Polish warehouse market continues to power ahead, reveals the latest report from real estate advisory firm Savills. The development pipeline is historically high and take-up activity is on track for another record year. Leased buildings are being targeted by investors from all over the world. After the first three quarters, the logistics sector accounts for close to half of the total investment volume in Poland.

“The economy is gradually recovering to its pre-pandemic levels, providing a solid basis for further rapid growth of the warehouse market. Poland’s industrial output rose by more than 10% in August while October retail sales were up by close to 7% year-on-year. An even stronger impetus is being added to logistics by e-commerce whose share of total retail sales has increased from around 5% in early 2020 to close to 9%,” says Katarzyna Pyś-Fabiańczyk, Head of the Industrial Services Hub at Savills.

According to Savills data, Poland’s total warehouse and industrial stock topped 23 million sq m at the end of September, having grown by more than 2.26 million sq m in 2021 alone. The largest volumes of new warehouse and industrial space were delivered in Western Poland and Upper Silesia. The biggest completion was Amazon’s BTS facility in Świebodzin totalling over 200,000 sq m, the second-largest logistics centre of the e-commerce giant in Poland.

At the end of September 2021, the warehouse development pipeline was at its highest in the history of the Polish warehouse market, standing for the first time ever at well above 3 million sq m, says Savills. Close to 3.75 million sq m of warehouse and industrial space is currently underway. Of that total, almost 45% has already been pre-let.

According to Savills, the levels of stock coming to the market are rising in response to strong occupier demand. With close to 4.9 million sq m transacted in the first three quarters, warehouse take-up is likely to surpass the 6 million sq m mark by the end of 2021 and to set another record. The largest leasing deal was for a 109,000 sq m BTS facility in Żerniki near Poznań delivered for DHL by Panattoni.

Robust take-up activity pushed the overall vacancy rate down from 6.5% at year-end 2020 to 4.7% at the end of September 2021. Average headline rents remain stable with signs of strengthening and stand at EUR 2.70–4.40/sq m/month for big-box facilities, with small business units (SBUs) in prime Warsaw locations fetching up to EUR 5.50/sq m/month.

Savills report Market in Minutes reveals that after the first three quarters the logistics sector accounts for close to half of the total commercial real estate investment volume (EUR 1.7 billion). The third quarter alone, which saw EUR 808 million worth of deals transacted, was the best for warehouses since the first quarter of 2020, or the pre-Covid-19 level.

Prime industrial yields have moved in from 6% to 4.5% over the last 12 months. Savills analysts expect that with yield compression slowing and land prices and construction costs on the rise, rental rates are likely grow year-on-year in the coming years.

“Latest industrial market data shows that development activity is at its highest on record. Investor appetite remains strong with forward purchases more and more popular and often the only way to build a sizeable portfolio of logistics assets due to shortage of income producing stock. Although prime industrial yields are at record levels and converging with office yields, they are still approximately 100 bp higher than in Western Europe, supporting the flow of global capital to Poland,” says John Palmer, Director, Head of Industrial Investment, Savills.