With its total warehouse, industrial and logistics stock surpassing 30.6 million sqm at the end of June 2023, the Polish market entered the European Union’s top three. Leasing activity slowed down during the second quarter of the year while developers continued to exhibit caution with regard to commencing new projects amid rising warehouse availability rates in existing schemes, reveals BNP Paribas Real Estate Poland.

Cautious tenants, cautious developers

The Polish market appears to be heading towards stabilization after a period of robust growth during the pandemic and a rather tumultuous 2022. With its total stock surpassing 30 million sqm, strategic geographical position and further improvements to its infrastructure, Poland has joined the European top three club, replacing the Netherlands in third spot.

Gross take-up for the period between April and end-June amounted to more than 1.03 million sqm, with more than 2.2 million sqm transacted in the year to date, down by approximately 40% year-on-year. The decline in leasing volumes was accompanied by a comparable downturn in development activity, which is expected to keep the warehouse and logistics sector in equilibrium in the near future.

“Tenants keep a close eye on warehouse occupancy costs. Equally important when it comes to lease decisions are their needs to reorganise supply chains and logistics processes. Take-up and supply volumes fell over the last quarter but remained relatively high. A stabilizing economy and a slower pace of rental growth bode well for the future,” says Tomasz Arent, Head of Industrial and Logistics, BNP Paribas Real Estate Poland.

With 0.69 million sqm of new supply in the second quarter, unoccupied warehouse space amounted to 2 million sqm at the end of June 2023, pushing Poland’s overall vacancy rate up to 6.7% - the highest level since December 2020. High financing costs are stalling new development activity, with developers frequently starting construction upon pre-letting at least 50% of a project’s floorspace, say the report’s authors.

At the end of June 2023, there was more than 2.1 million sqm of warehouse space under construction - a year-on-year decrease of 2.1 million sqm. The strongest development activity in the period April-June 2023 was in Warsaw II (390,600 sqm), Central Poland (376,700 sqm) and Lower Silesia (253,800 sqm), while the largest volumes of new space were delivered in Upper Silesia (158,200 sqm), Warsaw II (115,300 sqm) and the West (108,200 sqm).

Towards AI

AI-based solutions and implementations are increasing in importance in logistics, say experts of BNP Paribas Real Estate Poland. It is estimated that companies opting for early AI adoption in strategic supply chain management are likely to see their bottom line improve by 5%.

“We are on the brink of a revolutionary change in the logistics sector. Data analysis and use on a large scale, process automation and robotization, including AI-based solutions, will translate into a wealth of benefits such as improved efficiency and customer service and better cost management. In light of growing customer expectations and the rapid growth of e-commerce, strong logistics strategies will become a key element of building a competitive advantage for many companies,” comments Wojciech Nowicki, Director, Industrial and Logistics, BNP Paribas Real Estate Poland.

Rents hold firm

At the end of the second quarter of 2023, warehouse rents remained relatively stable in most regional markets. The highest were in Warsaw I. Looking ahead, rental rates are likely to remain under upward pressure in the coming months, particularly for space in warehouses boasting the highest certification ratings and meeting high ESG standards. The report authors say that despite lower general construction costs, average warehouse rents are expected to remain largely unchanged in the quarters ahead due to higher project financing costs.

The automotive sector is strong in Lower Silesia

The car industry is a major sector of the Polish economy, accounting for approximately 8% of Poland’s GDP. Opolian Silesia and Lower Silesia have, in recent years, provided a strong springboard for automotive companies to grow. The investments of such reputable brands as Mercedes-Benz, Toyota and LG are successfully attracting more investors to south-western Poland, including Intel, which is intent on building a semiconductor factory in Miękinia near Wrocław in partnership with state authorities for USD 4.6 billion. With this investment, the giant will enter a market worth USD 500 billion.

“The growth of the automotive industry has a strong impact on the Polish industrial and warehouse market - it continues to grow at pace not only in Upper Silesia, but also in Lower Silesia and Opolskie. Automotive companies account for more than 10% of total take-up in Lower Silesia,” says Piotr Załęski, Associate Director, Industrial and Logistics, BNP Paribas Real Estate Poland.