Although there is not much difference between market data for Q1 2020 and Q1 2019, opportunities and risks for the logistics sector resulting from the current situation will not be known until later months, depending on how the pandemic unfolds, says real estate advisory firm Savills.
According to Savills, Poland’s total warehouse and industrial stock reached 19.0 million sq m at the end of March 2020, with the largest markets being Warsaw (4.4 million sq m), Upper Silesia (3.2 million sq m) and Central Poland (3.1 million sq m).
“The coronavirus pandemic has intensified the trends that have been setting the tone for the warehouse market for long. The growth in online spending has bolstered demand for warehouse space coming from e-commerce. There has also been a shift of focus towards more automation in logistics which is taking on a new meaning. It reduces the reliance on the labour market amid the limited labour availability and rising wages, and has the additional benefit of material handling equipment being immune to health hazards,” says Kamil Szymański, Head of the Industrial Agency at Savills in Poland.
In Q1 2020, more than 428,000 sq m came onto the market, nearly half of which in the Wrocław region. At the end of March, there was 2.2 million sq m under construction across Poland. Warehouse stock is also growing in Tricity, where new supply hit an all-time high of close to 290,000 sq m. The number of urban logistics projects underway is also rising.
“It is anticipated that developers will be embarking more cautiously on speculative projects in the near term, which is likely to lead to increased competition for available leasable space when the market recovers,” adds Kamil Szymański.
According to Savills report, coronavirus seems to have had no effect on occupier demand in the first quarter of the year. The leasing volume in Poland between the beginning of January and the end of March was on a par with the same period last year (1.1 million sq m). There was also a notable increase in demand for temporary space.
At the end of March 2020, the overall vacancy rate stood at 7.2%, with no change quarter-on-quarter but up by 1.8 pp year-on-year. Rental rates remained largely unchanged throughout Poland. Rents for warehouse and industrial space vary by region, ranging between EUR 2.70–4.40/sq m/month for big-box warehouses and standing at EUR 5.25/sq m/month for small business units (SBUs), says Savills.
“Although the industrial real estate sector is undoubtedly one of the most resilient to the coronavirus crisis, it can hardly be called a beneficiary of the current situation. Manufacturing slowdown, supply chain disruptions and falling consumption will certainly have an adverse effect on demand for warehouse space if they continue long-term. On the other hand, Poland is likely to become an attractive alternative for European companies considering relocation of some of their production processes closer to consumers as part of post-pandemic strategies of eliminating risks of disruptions to supply chains,” concludes Kamil Szymański, Savills.