Colliers Poland: First quarter with record supply in warehouse market history

Interest in logistics and industrial space is not waning. Since the beginning of 2023, 1.9 million sqm of new warehouse space has been put into use, the highest in the history of the Polish market. Thus, the stock of the warehouse sector reached 29.6 million sqm. Colliers experts estimate that the volume of new supply will be lower in the coming quarters.

3PL sector leads the way
In Q1 2023, the volume of gross demand reached 1.2 million sqm. Among tenants, the largest amount of space in this period was leased by companies in the 3PL (Third Party Logistics) sector - 39%. The pharmaceutical industry is also worth mentioning, as it accounts for 10% of the gross demand volume, which in its case is an exceptionally high market share.

In terms of the structure of leases, a change has been evident for the last few quarters. In Q1 2023. 49% were new contracts and as much as 45% renewals, while in the same period last year these shares were 66% and 27%, respectively.

New warehouses and new space under construction
Some of the largest investments commissioned in Q1 2023 include the Zalando facility developed by Panattoni in Bydgoszcz (146,000 sqm), the next phase of Panattoni Park Wrocław Logistics South Hub (125,000 sqm) and CTPark Warsaw South (77,600 sqm) developed near Mszczonów.

However, the market is seeing a decline in the volume of space under construction. There is currently 2.2 million sq. m. of it under construction, compared to as much as 4.8 million sq. m. in Q1 2022. This is the result of developers' decisions to start fewer projects over the past year - at the beginning of 2022, the volume of newly started construction was about 1.5 million sq. m., while at the end of the year there were only about 300,000 sq. m. of new developments.

"The decline in space under construction seen since Q2 2022 is due to, among other things, uncertainty among investors, difficulties in financing investments, as well as unpredictable construction costs," says Maciej Chmielewski, Senior Partner, Logistics and Industrial Space at Colliers. - In Q1 2023, however, we see an increase in the number of newly started investments compared to Q4 2022. While at the end of last year it was 300,000 sqm, at the end of March 2023 their volume was around 830,000 sqm. Of the space under construction, 48% is purely speculative construction, although the possibility of such projects is currently limited due to the high requirements of financiers.

Vacancy rates are increasing
Since the beginning of 2022, there has been a noticeable upward trend in vacancy rates. In the period Q1 2022. - Q1 2023 it increased by 3.1 p.p., amounting to 6.2% at the end of March, the highest value of this indicator since Q1 2021. Vacancy in facilities delivered in the first quarter alone was as high as 31%. The occupancy rate in facilities under construction currently stands at 47%, and this is the lowest value of this indicator in the last decade. Colliers analysts forecast that 2023 will be characterized by a higher vacancy rate than 2022.

- This situation will be caused by lower net demand than last year. The share of renegotiations in gross demand may represent a higher percentage than in the last three years. The volume of space under construction, on the other hand, should remain between 2 - 3 million sqm. After high fluctuations in rental rates since the beginning of last year, the current year should see them stabilize, explains Antoni Szwech, Analyst in the Advisory and Market Research Department at Colliers.

- The increase in the volume of vacant space was mainly due to the delivery of a huge amount of new space in recent years, which was characterized by relatively high vacancy rates. However, their high rate should not be a cause for concern, as the rate is still at a fairly low level and, with a limited volume of new supply, it prevents the occurrence of a market shortage and has a positive impact on competitiveness in the market, adds Maciej Chmielewski.