A Dynamic Market
As in previous years, the positive development of the Polish logistics real estate market continued in 2019. According to BNP Paribas the stock of modern warehousing space has grown by approximately 40 % over the past few years (BNP Paribas: AAG, industrial & logistics market review, Poland 2018). Poland connects western and eastern Europe and plays an important role in intra-European freight transport. Also, Poland has four important freight ports along the Baltic Sea in Gdansk, Gdynia, Swinoujscie and Szczecin.
Growth Driven by e-Commerce
The warehouse and logistics market in Poland is driven by the “Amazon effects” and demographic shift. This, in large part, will continue in 2020. Today, the growth of e-commerce space is the single most dominant factor influencing the warehouse market in Poland. Share of e-commerce in the overall demand for warehouses in the last 10 years has grown from less than 1 to over 10 percent, and it is constantly growing. In reality the share could be bigger since it is difficult to estimate precisely what part of the warehouse space in Poland is used by e-commerce. Only the largest tenants, such as LPP or H&M rent separate e-commerce facilities. Likewise, Amazon and Zalando use their own facilities exclusively to process orders placed online. But many online stores use the services of logistics and courier companies where goods are colocated.
E-commerce revolution can be also felt in the parcel numbers. In 2018 Poles sent a total of nearly 370 million parcels, almost 30% more than just two years earlier. According to analyzes carried out by DHL, e-commerce shipments account for around 50-55 percent. According to estimates for 2021, the number of parcels in Poland may reach over 500 million per year.
Different Needs For Fulfillment Warehouses
E-commerce warehousing market is not homogeneous. On one hand, there are small players who are just entering the market or offering niche products. They often prefer to share warehouse space with other smaller players, for example with the help of Waredock platform. For them often warehouse is more than a place where goods are stored – more often it is the place where the final product for the final customer is created and packaged. Since many online stores do not know exactly how their needs will change, they can also be tricky customers for bigger logistcs parks who traditionally expect long lease terms from their customers. In 2020 we expect large logistcs parks becoming increasingly open in working with such growing e-commerce companies and offering more flexible terms, for example by offering co-warehousing and shorter terms.
There are also companies with large scale operations where adaptability of buildings is particularly important (eg in terms of height or floor load-bearing capacity, enabling use of automatic solutions). For such large e-commerce focused companies being able to accommodate large number of employees and providing them with appropriate social scene (changing rooms, canteen etc) plays a key role. In 2020 we expect that becoming carbon neutral, acting green becomes even more relevant for successful large players and this will also be visible in their sourcing for logistics services (read about Amazon becoming carbon neutral by 2040 — 10 years earlier than is outlined by the United Nations Paris Agreement).
New Operating Models
Technology and consumer preferences are changing. Report by Gemius ( „E-commerce in Poland 2017 and 2018″) stated that value of the e-commerce market in Poland was 9.11 billion EUR (40 billion PLN), and in 2020 it will exceed 15.9 billion EUR (70 billion PLN). Today, e-commerce customers pay less attention to shipping costs and more to speed. The effect of this will be an increased demand for urban projects, which we expect will also be more visible in 2020.
For developers, this means returning to the cities and their outskirts, where office buildings, housing and shopping facilities historically have replaced warehouses. At the same time, the lack of land and high prices reinforce the need to use the space efficiently. One example of this in 7R City Flex Last Mile Logistics project which offers a flexible range of spaces: from warehouses, trade and exhibition spaces to office space.
According to Anna Głowacz, a director of the industrial department at AXI Immo, the expectations now go beyond that the warehouse provides only a standard 10 m height. Tenants expect facilities individually tailored to the processes corresponding to their business – with enough power, floor space enabling the use of automatic robots or a roof garden for employees. As an example P3 logistics park in Poznań features above-standard number of docks and a height of up to 12 m.
Focus On Talent And New Technologies
Until recently, factors such as location, road infrastructure, availability of international connections determined where warehouse invesments would be made. However, with aging population in Western Europe investors, especially for e-commerce and production, are in search of places with enough work force and talent from universitites to support trends such as automation and building ecological facilities in the coming years.
By some estimates the expected value of the global automation tools market in 2020 will amount to USD 149 billion, and by 2024 it will increase up to USD 321 billion. In Poland large property owners are also investing into new technologies such as installing chargers for electric cars (eg Segro properties), solar installations for heating (P3 logistics parks) etc.
Total Warehouse Space in Poland Is On The Rise
Online stores need on average three times more storage space than traditional retail chains. With the Polish on-line trade market growing 20% annually the growth in space is also expected to continue.
According to AXI Immo, by the early 2020 there will more than 18 million sq meters of warehouse space in Poland – its triple of what it was 10 years ago. And demand during this time has increased more than five times. During the economic downturn of 2009, 765 000 sq meters was rented in Poland, compared to 4.01 million sq meters in 2018.
Warehouse Rent and Investments
Despite the dynamic growth of the logistics market, development costs remain modest compared to western Europe, as both large and inexpensive spaces are available. The New Investment Support Act, which entered into force in 2018 also strengthens the cost advantage.
Rent rates have also reached pre-crisis levels. In the years 2008-2009, the average effective rates were EUR 2.3-2.8 / sq m (base 3.3-3.5 EUR / sq m), and in 2019 effective rates start from 2.1 EUR / sq m. (base 3.3-3.6 EUR / sq m), in cities even 5.4 euros per metre. Looking into 2020 the prices are expected to rise. At the same time investments into warehouse spaces are currently almost 10 times higher than 10 years ago – 1.8 billion EUR warehouses 175 million EUR and in 2009, a trend we see in US and elsewhere.
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China’s Belt and Road Initiative
Belt and Road Initiative is the strategic project for the Chinese government which is in the early phases. Currently 90% of Asian cargo is delivered to Europe by sea. However, import of goods by rail from China has more than doubled in five years and continues to grow. Large flows of Asian capital are also coming to the CEE region and Poland. More than 20% of the warehouse space market in Poland belongs to funds with Asian capital.
Due to its geographical location, Poland is in strong position to become a bridge connecting western markets with Central Asia. On the downside this opportunity is hindered by administrative procedures and lack of infrastructure.
Waredock in Poland
Waredock is more than a warehouse listings page. Our vision at Waredock is a geographically dispersed distribution infrastructure that is enabled by data insights across the supply chain. We are working with Polish 3PL companies, property owners, businesses small and large in a range of industries. We help businesses get greater coverage in more markets. Our network includes every warehouse type, with the certifications and designations to store any specialized product. And, we’ll provide picking, kitting, shipment consolidation, and more.