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Is 1 million sqm of leased space a symptom of beginning of the end of slowdown at the warehouse market in Poland?

Jones Lang LaSalle summaries the Polish warehouse market in the latest edition of „Warsaw City Report – 4Q 2009”.

According to the new edition of Jones Lang LaSalle report „Warsaw City Report – 4Q 2009” approximately 1 million sqm of warehouse/light production space was leased in  2009 in Poland. The industrial vacancy rate still remain high due to the significantly limited occupiers’ activity  at  the market. The rents are stabilizing, although the market has to absorb vacant warehouse space in order to counterbalance the situation. Is this the end of a slowdown at the warehouse market?

Beata Hryniewska, Head of Industrial Agency at Jones Lang LaSalle says: „Despite the pessimistic forecasts, approximately 1 million sqm of warehouse space was leased last year (including expansions and renewals). This accounts for 2/3 of a total demand registered during the boom-year – 2008.  Systematic increase of demand across the whole country and clear growth (increased interest in leasing of warehouse space) in 4Q 2009 suggests a slow return of stabilisation at the market.”

According to Karolina Margielewska, research analyst at Jones Lang LaSalle, the warehouse market in Poland was heavily impacted by the economic slowdown in general. Additional effect is a change in the occupiers’ profile. “The logistic companies are not a key occupier any more, the share of production and trade companies is increasing.” In addition, more and more companies are interested in build to suit projects, as well as are interested in leasing and adaptation of space for the production firms.”

Last year also rents were decreasing on all markets across Poland. „High vacancy rates (18.1% in Poland), force developers to aggressive strategies and therefore rents decrease. It is forecasted, that in 2010 we will see rents stabilising on the same level as in 2009.” – adds Marzena Zielonka, Senior Consultant at Jones Lang LaSalle Industrial Agency.

Limited pipeline and stable demand level should result in reduction of vacant space on the market. However, the sublease market which has already caused slowdown in the industrial sector, will also have negative impact on the absorption.
Currently there are only six warehouse development under construction totalling approximately 100,000 sqm which accounts for 10% of new build projects in 4Q 2008. In such case there is limited perspective for a significant increase on the industrial space stock in Poland and the total stock should oscillate around 6.4 million sqm by the end of 2010.

Jones Lang LaSalle experts estimate, that demand for modern industrial space in Poland will remain similar to 2009 and it will not reach the level of 1.5 million sqm recorded in 2008. It is estimated that around 1.2 million sqm of industrial space will be leased both in existing, planned or “build to suit” projects. The conclusion is that whilst a slowdown is the industrial markets is unquestionable. However, very negative forecast had not proved to be correct. The market has defended itself by the driving power of its growth.