. Data for regional cities and emerging markets . • Warehouse take-up remains robust • Growing developer activity results in high supply levels • Vacancy rate down by 0.7% to 5.5% compared to 6.2% in June 2015 • Headline rents remained flat at the end of Q2 2016, with a slight upward trend recorded in some regions.

At the end of June 2016 total modern warehouse stock in Poland stood at 10,500,000 sq m. Occupier and developer activity is expected to continue its strong momentum, as revealed by global real estate services firm Cushman & Wakefield in its latest Polish Industrial Market Q2 2016 report.

Warehouse take-up remained healthy in Q2 2016 with 650,000 sq m transacted, representing an increase of around 6% or 34,000 sq m compared to Q2 2015. The strongest leasing activity was in Warsaw’s suburbs where 188,000 sq m of warehouse space was leased, followed by WrocÅ‚aw and PoznaÅ„ with 132,000 sq m and 110,000 sq m transacted, respectively. As in Q1 2016, strong occupier interest was also noted in smaller regional markets such as Bydgoszcz-ToruÅ„ (54,000 sq m), Rzeszów (13,000 sq m) and Szczecin (11,000 sq  m).

Robust occupier demand has kept the warehouse vacancy rate low with nearly 580,000 sq m of warehouse space vacant at the end of Q2 2016. The highest vacancy rate was in Warsaw (9.7%) and its suburbs (9.2%). The largest volumes of vacant space in Poland’s regions were in PoznaÅ„ (5.3%), WrocÅ‚aw (4.2%), Central Poland (3.9%) and Upper Silesia (3.6%).

The Polish industrial market is seeing a growing number of speculative projects underway underpinned by the low vacancy rates and rapid absorption of new warehouse space. Around 53% of the development pipeline is currently available for lease. At the end of June 2016, built-to-suit schemes accounted for 30% of the projects under construction while schemes with secured pre-lets made up the remaining 17%.

Strong developer activity has resulted in nearly 796,000 sq m of warehouse space under construction. Around 75% of the projects are underway in the largest industrial markets, i.e. in Poznań (173,000 sq m), Warsaw and its suburbs (134,000 sq m), Upper Silesia (113,000 sq m) and Central Poland (105,000 sq m), followed by Tricity (76,000 sq m), Wrocław (65,000 sq m), Lublin (50,000 sq m) and Krakow (46,000 sq m).

The growing developer activity has led to high supply levels with 207,000 sq m added to Poland’s total modern warehouse stock in Q2 2016, representing an increase of around 28% compared to Q2 2015. The largest volumes of new warehouse space were delivered in PoznaÅ„ (81,000 sq m), Central Poland (57,000 sq m), WrocÅ‚aw (30,000 sq m) and Szczecin (17,000 sq m).

Headline rents have remained largely unchanged in Poland, however due to low vacancy rate in some locations such as Upper Silesia a slight upward trend in rental rates was recorded. The highest rents are in Warsaw’s inner city (EUR 4.00–5.40/sq m/month) while the lowest are in Central Poland (EUR 2.40–3.80/sq m/month) and in the Warsaw suburbs (EUR 2.50–3.80/sq m/month). In other regions rents stand at EUR 2.50–4.00/sq m/month.

Regional cities

With approximately 3,070,000 sq m Warsaw remains the largest warehouse market in Poland. Upper Silesia, with around 1,850,000 sq m of warehouse space, is the dominant regional market and PoznaÅ„ is the fastest growing city (1,563,000 sq m). The leasing activity remained strong in Warsaw in Q2 2016 with 214,000 sq m of the total take-up (up by 55% on the take-up recorded in the same period of 2015). The transaction volume in WrocÅ‚aw totalled 132,000 sq m, reflecting a twofold increase on the figure noted in Q2 2015, while 110,000 sq m was transacted in PoznaÅ„. By contrast, Krakow attracted the least occupier interest with just 12,500 sq m leased. The highest vacancy rates in Poland were in Warsaw City (9.7%) and the Warsaw suburbs (9,2%). The strongest rise in vacancies was in Tricity (+4.3%, and projected to rise further to 6.1% by the end of the year), while Krakow’s vacancy rate fell by 7.2%, reflecting absence of readily available warehouse space.

Emerging markets

The south-east part of Poland is witnessing greater interest from occupiers and developers. With just over 250,000 sq m of existing modern warehouse and industrial space, the Rzeszów region is the largest emerging industrial market in Poland, ahead of Szczecin (177,000 sq m) and Bydgoszcz-ToruÅ„ (158,000 sq m). At the end of Q2 2016 the highest volumes of development pipeline were in Lublin (49,000 sq m) and Bydgoszcz-ToruÅ„ (31,000 sq m). The lowest vacancy rate of 0.1% was noted in Szczecin (down by 3.7%) and the highest in Rzeszów (at 5.5%).

Tom Listowski, Head of Industrial and Logistics Agency Poland and CEE Corporate Relations, Cushman & Wakefield, said: “Development and tenant demand on the Polish industrial market is still growing at a rapid pace as we closed out H1 2016. Over the course of first half of the year we witnessed further expansion on the market not only in the core locations but also new locations being created and built-out. The large amount of new supply (650 000 sq m delivered in first half of 2016), did not cause an increase in the vacancy rates. This underlines the rapid absorption of space being delivered which, in turn, is encouraging developers to implement further industrial and warehouse projects around the country. The large proportion of speculative space currently being constructed is also a very positive sign as this indicates developers anticipate that strong demand levels will continue.”

Report: Polish Industrial Market Q2 2016