Industrial market in Poland in 2023

Logistics market starting to cool down after record-breaking years

September 05, 2023

Overall H1 new take-up noted a further contraction, being 37% below results observed a year ago and 18% below the five-year average for H1. However, one has to keep in mind that H1 2022 was historically a record-high period. Subdued overall demand has been strongly influenced by large e-commerce players which are taking a time-out after their rapid expansion during the pandemic. Their share in total H1 2023 take-up stood at a mere 4%, compared to a peak of 20% in 2021. While the share of 3PL remained relatively stable, manufacturing picked up on the back of safeguarding inventories and reshoring movements.

Although inflation looks to have passed its peak and is starting to ease, it is still significantly above pre-pandemic levels. Expectations remain pretty stable with economists anticipating the ECB to have finished a tightening monetary cycle with deposit rates standing at 3.75% at the end of July.

Forecasts for growth this year remain uncertain with revisions appearing in the majority of economies. Nonetheless, expectations for 2024 are still positive. According to Oxford Economics, the Eurozone is set  to grow  by 6% in 2024-2027. Poland is to outperform these dynamics, with GDP growth at 11% rate in the corresponding period.

The H1 2023 results in Poland clearly reflected the overall performance of the European market. Total H1 occupier demand totalled 1.95 million m², 70% of which were new leases and expansions.

Although gross demand of 970,000 m² observed in Q2 was in line with results from the previous quarter, sum of new deals and expansions improved by 11% q/q. This result lagged behind the five-year H1 average by 24% but  was close to the average for 2018-2020, which was then described as strong and vigorous.

Beyond any doubt Upper Silesia remained the most sought-after destination, with 366,000 m² (net) signed in the region in H1 2023. Although the overall take-up was again dominated by the Big Five markets, which together were responsible for some 70% of new demand, activity was observed in numerous locations across Poland, both in established and emerging destinations.

Subdued demand combined with a gradual cooling down of development activity led to another increase in the vacancy rate, although it still remains below 7%. At the end of June 2023, the average vacancy rate for Poland stood at 6.9%, which represents 2.2 million m² of available space.

The time of sky high levels of new completions is now behind us, and the development side has begun. As of June 2023, total stock amounted to 31.5 million m². New developments delivered to the market in Q2 2023 were close to one million m². However, the amount of new space is anticipated to continue its decline in the coming months.

Prime rental values continued to grow. However, an equilibrium is anticipated to be reached soon as the pace is markedly slowing. Average rent in the Big Five markets rose by 5.3% compared to December 2022 and in June 2023 ranged from 3.5 to 5.75 euro/ m²/ month with regard to suburban logistics parks.

At the end of June 2023, prime warehouse yield for a multi-tenant scheme with a five-year lease agreements, was estimated to be at approx. 6.40%.

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