Central Poland is seeing strong interest from warehouse tenants and developers. Benefiting from its excellent location, this region is particularly attractive for logistics, distribution and e-commerce.
With industrial and warehouse stock of 3.48 million sqm, Central Poland is the third-largest industrial market in Poland. Of that total, more than 1.7 million sqm came on stream in 2018–2021. The key advantage of the region is its central location, at the intersection of the A1 and A2 motorways and the S8 expressway connecting Wrocław, Łódź and Warsaw. Benefitting from its location and well-developed road network, Central Poland has, for many companies, become a transhipment hub for goods distribution throughout Poland and beyond.
A supply boom in the Łódź area
In December 2021, the Łódź province accounted for as much as 18.3% of the warehouse development under construction in Poland. “At the end of last year, only 38% of warehouse space underway was pre-let, with the remaining 62% being built speculatively,” says Agnieszka Giermakowska, Research & Advisory Director, Newmark Polska. “Stock under construction will help alleviate the shortage of ready-to-occupy warehouses in Central Poland in the coming quarters. With the vacancy rate in the Łódź province at a record low of 3.2% at the end of last year, there has been a clear undersupply in the region for some time.”
“The industrial property market in Central Poland continues to power ahead, driven by the pandemic. Warehouse demand in the last two years reached levels never seen before. In 2021, take-up hit 907,000 sqm, up by over 26% on 2020,” says Katarzyna Bojanowicz, Business Development Director, Industrial and Warehouse Department, Newmark Polska. “Such a strong demand has encouraged developers to build speculatively. In 2018 and 2019, speculative construction was limited, but in 2020, when companies stepped up leasing activity, the winners were those developers that had vacant warehouse space.”
According to the statistics from Newmark Polska, the region’s leading developers include Panattoni, Hillwood and 7R, while the largest projects underway are: Panattoni Park Zgierz, Panattoni Park Pabianice, Hillwood Stryków II (a BTS facility for Oponeo) and Panattoni Park Stryków IV - Beta East and West. Last year’s biggest completions comprised Loogic Park Radomsko, 7R Park Łódź West II and 7R Park Łódź East.
Heading west
Central Poland was one of the first industrial and warehouse hubs that experienced exponential growth in Poland in the early 2000s. “Historically, development activity has focused on Widzew and Stryków. Today, there is a growing scarcity of land for warehouse projects in these areas. In addition, these locations have lost some of the appeal they had for tenants 10 years ago due to traffic congestion on access roads caused by the high density of industrial parks in the area,” says Agnieszka Marczak, Senior Advisor, Industrial and Warehouse Department, Newmark Polska. “Meanwhile, new locations have been opening up on the logistics map of Central Poland as a result of the completion of new roads, including the S14 expressway, the western ring road of Łódź and Pabianice. The highest concentration of new developments is in Konstantynów Łódzki, Pabianice, Zgierz and in the vicinity of Aleksandrów. This does not mean that there is no new build underway in the region’s eastern areas. New projects continue to be developed near the A1 motorway.”
Drive to attract workers
Another reason why new locations are emerging in the Łódź conurbation is that developers are looking for easier access to labour pools. Locations that used to enjoy the strongest investor interest are not that attractive any more due to market saturation levels. “Employers present there successfully recruited the skilled workers they needed, while ensuring appropriate employment conditions. As a result, due to labour shortages, newcomers to the region are likely to face recruitment challenges. This often means investors need to continue to compete on salaries, which is not always possible due to their budget constraints. This situation in the labour market supports demand for investment land in other areas of the region which so far have been favoured by few companies,” says Małgorzata Mudyna, Randstad Professionals Regional Manager, Randstad Polska. Investors' decisions are impacting the local labour market. “We are seeing increased demand for warehouse staff, technical workers in manufacturing, including electricians, electrical mechanics, installation electricians, welders, as well as construction workers such as bricklayers, plasterers, construction equipment operators and installation fitters. Truck drivers are also in demand,” adds Małgorzata Mudyna.
Łódź is driven by logistics and e-commerce
On account of its geographical position, Central Poland is a typical transhipment hub with most space designated for warehousing. Last year’s leading sectors in the region were e-commerce and logistics. Record-breaking deals were secured by Jysk, which renegotiated its lease for 70,000 sqm in Logistic City – Piotrków Distribution Center and leased 54,000 sqm in Loogic Park Radomsko. In the whole of 2021, the Łódź province reported close to 907,000 sqm of lease transactions, up by over 26% on 2020’s take-up.
Rental growth
Rental rates have been on the rise in recent weeks. Headline rents in Stryków stand at EUR 3.00-3.40/sqm/month, while warehouses in Łódź fetch EUR 3.50-4.00 per sqm and Small Business Units command more than EUR 4 per sqm. Locations in western Łódź tend to be less expensive, with rental rates starting from EUR 3.50 per sqm. With headline rents ranging between EUR 2.70-3.10 per sqm, Piotrków Trybunalski has always been the cheapest location in the region.
“Since warehouses in Łódź are located close to the city centre, not on its outskirts, rental rates are really very attractive and close to levels seen in Warsaw’s suburbs. Compared to Łódź, Stryków and Piotrków Trybunalski fetch lower rents, but tenants may be faced with greater labour shortages,” says Katarzyna Bojanowicz. “Development activity has slowed down in Stryków, whose stock is dominated by older warehouses. The landlords of those industrial parks are, however, bringing them up to current standards, replacing lighting with energy-efficient LEDs and carrying out other necessary refurbishment works. Stryków will certainly be favoured by price-sensitive companies. Tenants present in this region will also want to grow in these and neighbouring parks.”
However, according to Agnieszka Marczak, rental growth is expected in Central Poland, similarly as in the whole of the country, driven by the rising prices of plots, contractor services and building materials. “Last year, Central Poland witnessed large deals and a record-breaking take-up level, which pushed its vacancy rate down significantly. It is difficult to estimate the impact of the political and economic situation in Eastern Europe on the warehouse market in Central Poland, but delivery times of new projects are likely to be longer with more limited speculative construction on the cards,” concludes Agnieszka Marczak.