“2020 will be a year of challenges and unprecedented changes which will reshape economies, sectors, companies and test our ability to quickly adapt to new realities,” says Tom Listowski, Partner, Head of Industrial and Warehouse, Central and Eastern Europe, Cresa.

Risks related to COVID-19 will certainly be the key contributory factor in this year’s economic slowdown in Poland. For now, it is difficult to assess the scale of the pandemic’s impact on economic activity, but general occupier demand, although fragmented, has weakened as companies stop to assess the impact and implement plans to safeguard cash flows, employees and maintain a level of business continuity.  Poland’s strong economic fundamentals should help ‘soften the blow’ and will undoubtedly create new opportunities as the government and private sector focus to contain the impact of COVID-19 and implement measures which would allow the economy to overcome these exceptional challenges.

Over the last several week’s global real estate markets have been impacted across all segments however the industrial and logistics sector is showing the most resilience due to its close interconnectivity with physically providing humanity with essential products and equipment. Notwithstanding, some segments in the manufacturing sector will witness severe declines however we are already noting substantial growth in certain areas. 

“If we look at demand, starting from us, the consumer, and the social distancing restrictions in place, many of us have been forced to investigate alternative sources to purchase food, grocery, health and medical products. With shopping malls shutdown and grocery stores initially struggling to replenish stockpiles as a result of panic buying, coupled with the fact there are queues due to limits to the number of people per store, for many this has meant exploring the world of e-commerce and ordering products delivered to their home,” adds Tom Listowski.

Online shopping has been on an upward trajectory for several years as a result of a structural change from bricks and mortar retail towards e-commerce. Companies already trading online are currently seeing a surge in demand, some even breaking sales records experienced pre and post-Christmas season, whilst others are now scrambling to develop their online sales platforms. COVID is definitely accelerating this transition to online and for many companies, adapting to and embracing e-commerce is now an absolute necessity which will boost the logistics sector, its supporting industries and therefore also the need for big box logistics and in-town warehouse space.

“Many of the traditional retailers however are hemorrhaging cash reserves right now as a result of retail store closures and no sales occurring, despite the fact that all the shops are fully stocked up. With ports functioning at near normal capacity in China, retailers are struggling with where to store unsold inventory and will also now need to manage new shipments arriving in the coming weeks. Ports are an expensive solution to house stock for extended periods of time therefore there has been a dramatic increase in requirements for short term warehouse space, 3- 6 months primarily from retailers as they buy time and try gain some visibility on when stores could re-open,” says Tom Listowski.

The first quarter of this year has already witnessed some significant transactions take place therefore the occupancy take-up figures are quite strong. 

In the medium-long term Poland should become the recipient of new investments as manufacturers decide to diversify their manufacturing locations and potential over reliance in certain geographies. Producers will look to optimize their supply chains with more focus given to risk aversion and safeguarding the future movement of goods in relation to costs. Manufacturers will be implementing steps in locating production functions closer to their customer bases and reshoring projects are likely to also increase, a trend which has been witnessed for several years now.

“On the supply side, the majority of industrial and logistics development projects already under construction are moving forward with minimal disruption or delay. Planned projects, especially those which are speculative, are being reviewed with caution. In the short term, developers may face challenges in working through various administrative formalities connected with planned projects as a result of a reduction in resources working within the municipalities. This may therefore delay the commencement of new projects for several months. For projects already under construction and which comprise of a high speculative component, we can expect this space to either be leased on a short term basis if possible, if not then we expect time to lease vacant space coming to market in 2020 may push out as companies revisit their growth and acquisition activities. This in turn may put additional upward pressure on the vacancy rate by year end as we should expect that some of the existing space will come back on the market as a result of downsizing activities or defaults,” says the expert of Cresa.

Developers may also see some delays in working with their banking institutions and investors who will need to give priority to managing investments in other assets classes which are facing significant challenges.

“We will see a deceleration of Poland’s growth which will likely trigger a fall in construction costs as well as land prices. This will benefit those occupiers and investors who are committed but in the planning stages on strategic industrial and logistics space projects in Poland,” concludes Tom Listowski, Partner, Head of Industrial and Warehouse, Central and Eastern Europe, Cresa.