- CBRE experts point out that the industry is rushing, but higher costs will mean less new supply, which will grow at a slower pace.
- It will also be more expensive. Rising material prices are translating into rents which, depending on the market, have increased by 5-15%. over the year and it’s probably not the end of the increases.
- The demand for warehouses in the first quarter of 2022 remained high and amounted to 1.5 million m², as in the previous year. This state of affairs will continue in the months to come.
– Warehouses are thriving despite the difficult context. The pandemic has not stopped this rhythm, nor has the war in Ukraine. However, these factors cause several global problems. The most important are, among others, collapse of supply chains or limited availability of raw materials and goods. We will clearly see the consequences of these phenomena in our region of Central and Eastern Europe, including Poland. Demand, supply and investments will be affected – says Beata Hryniewska, head of warehouse and industrial agency at CBRE.
Higher costs mean lower supply
In the first quarter of 2022, warehouse space in Poland exceeded 24.7 million m². This is 3.5 million more than the previous year. 4.7 million m² remain under construction, almost doubling compared to the beginning of 2021, when 2.5 million m² had been built. warehouses. From the point of view of new installations, the increase in construction costs is of paramount importance. Only in 2021 did they increase by more than 20%, and this year it will be worse due to the limited availability of imported raw materials from Ukraine and Russia. This will ultimately result in longer construction times for a single warehouse. Construction projects that started before the invasion will continue to secure materials, but there may be a problem with starting new investments. This creates a risk of supply shortages. Especially since the vacancy rate in the first quarter of 2022 was historically low and amounted to 3.4%.
Rising construction costs go hand in hand with rising inflation, which also includes energy prices. This will defeat the energy-saving trend in the warehouse industry. The attitude towards the eco is visible both on the side of tenants and developers. The former are increasingly taking ESG issues into account when choosing the right building. On the other hand, developers, wanting to stand out from their competitors, rely on sustainable solutions that increase the attractiveness of the building.
Demand will not drop…
The demand for warehouses in the first quarter of 2022 remained high and amounted to 1.5 million m², as in the previous year. This state of affairs will continue in the months to come, among other things due to the possible relocation of Ukrainian companies or the still strong dynamic of e-commerce. Online sales in Poland are increasing – customers who started buying this way during the pandemic have continued this habit, leading to the development of the infrastructure needed to efficiently manage the growing number of orders. It is, among others, o distribution warehouses or warehouses for returns.
– The new wave of COVID-19 in China causes further disruptions in production and logistics – the ordered goods will arrive in Poland and Europe with a delay. Companies will want to increase inventory in warehouses to protect against further disruptions to supply chains, which will drive demand for space – comments Beata Hryniewska, head of warehouse and industrial agency at CBRE.
…although it will cost more as rents rise
The rise in the cost of materials is reflected in rents, which remained stable until the third quarter of last year. Later, the market trembled. Contractual rents, depending on the market, have soared by 5 to 15%. over the past year, and it’s probably not the end. In Warsaw, rents increased by 15%, in Łódź and Katowice by 8% and in Gdańsk by 7%. It is worth pointing out that rental levels in Poland have long been lower than those in Western Europe and most Central European countries and therefore, despite the increase, they will remain competitive. However, the PLN-EUR exchange rate is unstable and rents are billed in EUR and payable in PLN, which may have a negative impact on tenants.
Investments in warehouses remain solid
Industrial and logistics assets are considered a solid investment product, which has proven its worth in times of pandemic in particular. In 2021, the total value of investments amounted to 5.71 billion euros and was made up of a record number of 164 transactions. More than half of the total amount was related to the warehouse market. Most of the investors came from Europe and the value of the Polish capital was 4%. It is important to note that there have not been large capital flows from Russia, Ukraine and Belarus in industrial and warehouse investments in recent years. This means that the exit of these investments will not significantly affect the overall result. Investors will continue to be interested in warehouses, although temporarily, due to the war on Ukrainian territory, caution and anticipation of how the situation will develop prevail.