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News Release

Warsaw

Warsaw Suburbs – the largest industrial hub in Poland and CEE

Total warehouse stock exceeds 2 million sq m, logistics operators dominate in the structure of demand


Warsaw, December 2, 2013 – Jones Lang LaSalle presents the Warsaw Suburbs Industrial Market Profile after Q3 2013.

Kamil Szymański, Business Development Manager, Industrial Agency, Jones Lang LaSalle, commented: “With the threshold of two million sq m of existing warehouse stock being crossed in Q3, the Warsaw Suburbs region is by far the largest industrial hub in the country and also in the wider CEE region. This can be put down to the proximity of the capital city - the country’s economic powerhouse and largest urban area; as well as the on-going improvements to the region’s connectivity, in particular with regard to the road network. The area has recently gained access to the European motorway network. Also, the new S8 exit road from Warsaw towards Wrocław will open new development opportunities. However, road investments can also introduce some changes to the regional market landscape as the improved access to the Central Poland via the new A2 motorway might markedly raise the attractiveness of that latter region”.

The Warsaw Suburbs zone extends approx. 50 km from Warsaw (excluding the city itself), with the largest hubs being found to the west and south-west of the city (Pruszków, Ożarów Maz. Błonie, Teresin, Sochaczew, Nadarzyn and Piaseczno).

Demand to slow down in the last quarter
During the first three quarters of 2013, the Warsaw Suburbs region attracted new demand totalling 142,000 sq m ( y-o-y increase of 13.5%). National comparisons additionally underline the strength of this region: during that period it accounted for as much as 22% of net take-up in Poland. The vast majority came from the 3PLs (62% of all newly leased space), with retailers coming second (19%). Simultaneously, lease renewals amounted to 70,000 sq m, up by 10% on 2012.

The average size of a new lease in the first nine months of 2013 was barely over 3,800 sq m, down from the average of more than 4,700 sq m registered in the same period of last year. This can be put down to a low number of large deals (larger than 10,000 sq m) on one hand and the high availability of smaller units (smaller than 3,000 sq m) offered at reasonable rents on the other. A new phenomenon seen at the moment is the increasing number of short-term deals. This is particularly the case for developments with high vacancy rates, where landlords, in order to mitigate them, are now less reluctant to offer leases of shorter than two years than they were in the past.                                                  

Vacancy rate will decrease
At the end of Q3, the available space on the Warsaw Suburbs market totalled 268,000 sq m (13.1% of the entire commercial stock) and was on a par with the figure registered in Q2. The largest availability is typically found in the Błonie area (129,000 sq m - 22%), the lowest – in Pruszków (18,000 sq m -5.8%). Jones Lang LaSalle expects, however, that the vacancy rate in the Warsaw Suburbs will be gradually falling in the next few years, which will be a result of the increasing interest from potential tenants. Despite the high overall vacancy, scarcity of larger units (of over 20,000 sq m) remains the bottleneck for tenants seeking quick accommodation for their extensive operations. The alternative is the construction of a BTS (build-to-suit) building.                                                               
Fewer completions and lower construction activity                    
After 2009, the new annual completions average for the Warsaw Suburbs was established at roughly 50,000 sq m. Since the beginning of this year, the regional market has expanded by a modest 37 000 sq m (46% decrease on the same period of 2012). New floor space was delivered within the Tulipan Park Warszawa (24,000 sq m), MLP Pruszków II (7,000 sq m) and Prologis Park Janki (6,000 sq m).  
                                                                                          
Today, pipeline projects in the construction stage total 23,000 sq m, with 18,500 sq m in the MLP Pruszków II (of which 3,000 sq m is speculative space) and 4,500 sq m in the SEGRO Business Park Warsaw Ożarów. However, neither of the aforementioned projects will be completed in 2013, which shows that in terms of construction activity, this year is below the average of the last few years.

Rental stability to stay                                                                   
Currently, prime headline rents in the region range between €2.7 (Błonie) and €3.6 sq m (Pruszków) per month. Effective rents are lower - €2.1 to 2.8/ sq m/ month. Whilst the vacancy rate is expected to record a decrease in the short term, rental levels will remain stable in the foreseeable future. The pool of available units, although decreasing, is still large and does not justify an upward pressure on rents. In addition, the current market conditions are not favourable for developers willing to speculate, and the modest new supply is largely absorbed during the pre-construction stage. This indicates that the market is relatively balanced and so rents should be too.