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Tenants beware: the supply of large warehouse units is drying up

A limited supply of space and a lack of speculative projects is creating a supply gap despite weakening demand. Tenants need to act in good time to secure space. Such are the conclusions of a report on industrial market in Poland in the first half of 2012.

Warsaw, 25 July 2012 – 560,000 sqm of space was leased in H1 2012. Compared with the first half of the previous year, this lease volume was down by some 40%. The majority of leased space (70%) was the subject of new contracts. The volume of renewals remained significant (172,000 sqm) during H1 2012 but it will probably fall because most of the leases signed in 2006 to 2008 have been already extended.

Still at the top of the list of the most popular locations are Poland’s main logistics regions. In Upper Silesia some 138,000 sqm of space was leased (which is 25% of total gross take-up in H1 2012). Slightly less space, around 108,000 sqm, was covered by deals in the Warsaw Suburbs. The lease volume in Central Poland reached 101,000 sqm and that of Wrocław was 91,000 sqm.
“The biggest part of take-up was once again accounted for logistics operators. In the first half of 2012, companies from this sector leased 253,000 sqm, which represented 45% of total take-up,” says Tomasz Olszewski, Head of Industrial in Central and Eastern Europe, Jones Lang LaSalle.

At the end of Q2 2012, warehouses offering a total space of 810,000 sqm remained vacant. The overall vacancy rate reached 11.7%. Taking into account the total available supply in the region, the Warsaw Suburbs have the largest offer. Warehouses with space totaling some 375,500 sqm are vacant at the time of writing. A high volume of space was also available in Central Poland (approximately 133,800 sqm) and in Wrocław (around 87,500 sqm).
Warehouse space of 333,000 sqm was constructed during H1 2012, almost twice as much space as in the first half of the previous year. The largest increase in supply volume was seen in the Warsaw Suburbs (68,000 sqm). Warehouses offering space of 59,500 sqm were completed in Poznań, which strengthens the city’s position as the third largest market in Poland. New developments were also significant in Central Poland (41,200 sqm) and Upper Silesia (37,900 sqm).

Tenants should note that developers are still focusing on projects secured by lease contracts (pre-let and BTS). The share of speculative developments is marginal: at the end of the first half of 2012 just 8.3% of warehouse space was being constructed without lease contracts.
“The shortage of speculative space has been noticeable for a long time. Moreover, the Polish market now faces the decreasing potential of existing parks. Developers have built on almost all the sites which were bought during the boom of 2008,” comments Tomasz Olszewski.
Looking at the whole of Poland, rents remains stable. A smooth growth trend is noticeable in regions with low vacancies, such as Upper Silesia, Poznań and Kraków. The highest rents were found within the administrative borders of big cities. For Warsaw Inner City, effective rents ranged from 3.60 to 5.30 € / sqm / month, while in Kraków it was 3.30 to 4.00 € / sqm / month. Slightly lower rents were offered in Upper Silesia (2.45 to 3.40 € / sqm / month), Central Poland (2.70 to 4.50 € / sqm / month), Poznań (2.60 to 3.00 € / sqm / month) and Wrocław (2.50 to 3.10 € / sqm / month).
Jones Lang LaSalle’s report warns tenants that they should not wait to take decisions.

“The situation on the industrial market today is completely different to that in the first half of 2011. The decreasing vacancy rate and a lack of speculative projects means that tenants are often unable to find appropriate warehouse space. Those searching for large units (i.e. over 10,000 sqm) are particularly likely to face a supply gap because available space is widely scattered,” Tomasz Olszewski sums up.