Industrial and logistics real estate market in CEE region - summary of the 1st half of 2022.
Very interesting report by CBRE that focuses on the economic and real estate markets in Central Eastern Europe after 1H2022. Below please find our summary on the Industrial & Logistics sector.
✅ 50 million sq m - the total stock of modern industrial and logistics space across the whole CEE region.
✅ 52% of the stock is located in Poland, 20% in Czechia, 12% in Romania, 9% in Hungary and 7% in Slovakia.
✅ 6 million sq m – space being under construction in CEE region (most is already pre-leased).
✅ 3.2% - is the average vacancy rate. The rate varies depening on the location from 0.5% in the Prague area, 2-3% in Poland, Slovakia and Romania, up to 6.4% in the Budapest area.
✅ EUR 5 / m / month - average headline prime rents in logistic parks.
Source: CBRE
Warehouse market - summary of the 1st half of 2022
What does the warehouse market look like after the 1st half of 2022? Below is a summary.
✅ 26.15 million sq m - total warehouse resources (+19% y/y). 2.42 million sq m was a new supply (+107% y/y) and 4.35 million sq m (+30% y/y) is under construction.
✅ The base rents ⤴️ and are in the case of big box warehouses € 3.40-4.80 sqm / month and in the case of SBU € 5-5.75 / sqm / month.
✅ 3.3% vacancy rate (-1.7% y/y). 867,000 sqm is available immediately (-32% y/y).
The long-term outlook for the market remains favourable because "in light of disrupted supply chains and high inflation, companies from various industries will strive to improve the efficiency of logistics processes, including their relocation and shortening of supply chains".
Source: Cushman & Wakefield Industrial.pl
Demand and supply on the warehouse market - forecast
In the coming years, the demand for warehouses will continue and the supply will slow down. CBRE informs about the current situation on the warehouse market.
✅ 26.1 million sqm - this is how many warehouses we have after the 1st half of 2022 (+20% y/y). In 2022, 2.2 million sq m have already been built and 4.4 million sq m are under construction. Thus, we will start 2023 with over 30 million sqm of warehouses.
✅ 3.2% is the vacancy rate and is the lowest in history.
✅ The demand for warehouses will be generated mainly by production 🏭 and automotive 🚘. E-commerce will also be a driver of demand, although not as strongly as in previous years.
Source: bankier.pl
Warehouse market in Poland - summary of the first half of 2022
CBRE summed up the first half of 2022 on the warehouse market in Poland.
✅ 26.1 million sqm - warehouse space in Poland (increase by 20% year on year)
✅ 4.4 million sqm - under construction (49% speculative)
✅ 3.2% - vacancy rate (record low)
✅ Base rent growth is growing (€4.6)
Source: CBRE
Stabilization of global supply chains
Tight global supply chains show signs of improvement. According to Financial Times the latest data show some signs of stabilization.
✅ According to Freightos, the average cost of transporting a standard container (40 feet) fell by 45% compared to last autumn.
✅ Since the beginning of the year the number of ships waiting to be unloaded in the port of Los Angeles has decreased by 75%, despite the fact that June was the most active month in over a century.
✅ According to Flexport air cargo deliveries time is constantly improving.
✅ The Global Supply Chain Pressure Index, run by the Federal Reserve Bank in New York and showing tensions in supply chains, fell by 57%.
Source: Financial Times
E-commerce extend the warehouse space
Currently, over 7 million sqm of warehouse space in Poland (30.7% of the total supply) is dedicated to e-commerce.
Comparing to 2019 this is 84% increase in space for e-commerce services.
According to Rzeczpospolita, "Logistics companies are still expanding their warehouses, the demand is still high. Companies are replenishing their stocks, and e-commerce is increasing their space".
Source: Rzeczpospolita
Further increase in demand for warehouse space
According to The Wall Street Journal, Prologis predicts that an increase in inventory could demand another 500 million square feet (46.6 sq m) of warehouse space.
According to CBRE the industrial real-estate market remains extremely tight with demand for e-commerce along with upheaval in supply chains. Vacancy rate for warehouses across the USA are down to 2.9% (vs 7.7% 10 years ago).
Source: The Wall Street Journal
ESG in European logistics market
"European Logistics and Supply Chain Sustainability Report 2022" is a very interesting research* on ESG in European logistics done by law firm HFW and warehouse developer Panattoni. Please find the executive summary below:
✅ 66% of third party logistics providers have won new business as a result of their ESG practices.
✅ 62% of companies are willing to pay extra for ESG certifications however exact amount depends on the size of the increase.
✅ 80% of companies have goals and targets in place to support environmental programmes and employee welfare aims with 75% having measures to address corporate governance.
✅ 45% of manufacturers and retailers believe that linking executive compensation to ESG targets would encourage improvements.
*research was conducted among logistics executives across 12 European countries.
Source: HFW and Panattoni
The dynamics of SBU & Last Mile market
It is highly recommended to get familiar with Colliers report "SBU & Last Mile Logistics Sector in CEE-15". Our summary is below:
✅ Total resources of the Industry & Logistics (I&L) market for the CEE-15 region exceeded 50 million sq.m.. Poland, as the largest market, accounts for almost 25 million sq.m..
✅ The total space stock of Small Business Unit and Last Mile Logistics on the CEE-15 markets amounts to over 3 million sq.m., of which Poland is approx. 2 million sq.m.
✅ Approximately 500.000 sq.m. of SBU / LML space is currently under construction in the CEE-15 countries, most of which (310,000 m2) is being built in Poland.
✅ Due to changes and disruptions in consumer behavior, production of goods and global supply chains caused by the pandemic and the war in Ukraine, the industrial and logistics space is the most sought-after asset both in the CEE region and globally.
Source: Colliers
The construction of the first logistics park financed by Newport Logistics Fund, has started near Łódź
Newport Logistics Fund is investing on the warehouse real estate market and has just announced the start of the construction of it's first fully financed logistcis center. Near Łódź the construction of a hall with an area of 6,300 sq.m., fuly leased by DPD - one of the largest courier companies in Europe, has started. The facility will be part of a complex of two buildings with a total target area of 32,000 sq.m.
In the logistics park in Lućmierz near Zgierz, financed by the Newport Logistics Fund, the construction of the first hall with an area of 6,300 sq. m. has started for the needs of DPD. One of the largest courier companies in Europe, whose sorting plants pass through 7.5 million shipments every day, will use the facility in the first quarter of 2023. The cross-dock building will house one of the largest and most modern sorters of this company in the country and functional office and social facilities.
The hall will be equipped with a number of sustainable solutions - incl. photovoltaic installation and electric car charging stations - and will be BREEAM certified at the Excellent level.
The logistics park developed by Newport Logistics Fund will ultimately cover two buildings with a total area of 32,000 sq m. The investment is being built in one of the main logistics centers in Poland and Europe, near the A2 motorway and the Emilia junction. 4 million people live here within an hour by car and as many as 180 million consumers within 6 hours. Excellent transport connections are complemented by the nearby Intermodal Container Terminal, connecting China with Western Europe.
