Report: The industrial market in Central Poland – at the centre of attention
AXI IMMO presents a special publication "At the centre of attention. Analysis of the industrial market in Central Poland".
Poland’s largest commercial real estate advisory firm presents a special publication, “At the centre of attention. Analysis of the industrial market in Central Poland”.
The Łódzkie Voivodeship (Central Poland) has been attractive for developers for years due to its strategic location and developed road infrastructure. The projects developed in Central Poland feature a high unit volume, i.e. over 30,000 sq m, which exceeds the national average by 15%. On the take-up side, logistics, retail and production have accounted for more than 75% of regional leases in recent years. Despite the vacancy challenges (10.2% + 480 bps y-o-y), developers are maintaining a high pace of new project construction at 397,000 sq m (+13% y/y) at the end of Q1 2024. Despite the prospect of a decline in new developments, the market remains stable, offering attractive development opportunities for investors.
A unique warehouse market in the Łódź Voivodeship
The Łódź Voivodeship has for years been the third-largest industrial and logistics region in Poland, after the Mazowieckie and Śląskie Voivodeships. At the end of 2023, the total stock of modern industrial space amounted to 4.5 million sq m, which accounted for 14% of the country’s total stock. Significantly, in the last five years, the market in the Łódź Voivodeship has grown by 74%, with the highest growth recorded in 2019 and 2022. Apart from well-known locations like Łódź Widzew, Stryków, and Piotrków Trybunalski that have been there for more than ten years, the last three to four years have seen the dynamic development of new sub-markets, some of which are emerging near the Łódź motorway ring road, like Konstantynów Łódzki, Zgierz and Pabianice or micro-markets spread around the Łódzkie Voivodeship, such as Łowicz, Kutno, Rawa Mazowiecka and Koluszki. Figures for Q1 2024 show that only one development of 26,600 sq m was completed in the Lodz Voivodeship, adding slightly to the region’s total stock. The most active developers in the region are Hillwood, Panattoni, 7R and MDC2. On the other hand, the largest developments still to be delivered in 2023 include Hillwood Łódź II Chocianowice (97,000 sq m), Hillwood Rawa Mazowiecka (78,000 sq m) and 7R Park Łódź East (nearly 47,000 sq m).
Monika Rykowska, Research & Marketing Director, AXI IMMO, comments:
“In the last three years, developers have supplied over 435,000 sq m of industrial space year on average in the region; 2022 set a record with developers delivering almost 650,000 sq m. Over 70% of the 415,000 sq m of further market expansion in 2023 came from speculative construction. Over 60% of the additional space developed in the voivodeship was delivered in and around Łódź last year, making it the greatest delivery of new space.”
The first quarter of 2024 on the Łódź warehouse market
By the end of March 2024, 397,000 sq m were still under construction, of which 65% is not leased space. Note that developments that have begun are projects introduced in 2023. Developers have yet to start work on new development in the region in the first few months of 2024. A number of the biggest projects, including Hillwood Zgierz II (77,000 sq m), MDC2 Park Łódź South (52,000 sq m), and Panattoni Park Łódź West II (51,200 sq m), are anticipated to be completed by the end of this year.
Over the past five years, the highest gross take-up rates (taking into account new leases, expansions and extensions) were recorded between 2019 and 2022. The average total tenant activity during the period mentioned above was 749,000 sq m, with the record year being 2022 when as much as 835,000 sq m was leased. It is also worth noting the high share of new leases, which averaged more than 63% of transactions between 2019 and 2022. However, the economic slowdown observed in 2023 affected overall tenant activity, with 606,000 sq m leased last year (-27% y-o-y) in gross take-up, while new contracts and expansions (net take-up) amounted to 303,000 sq m, a 44% year-on-year decline. Nevertheless, the first quarter of 2024 closed with a gross take-up of around 180,000 sq m, comparable to Q1 of the previous year. Some of the largest transactions completed in the recent period included a new 62,000 sq m deal signed by a confidential retail tenant at Hillwood Łódź II in Q1 2024, in Q3 2023, Leroy Merlin leased 50,200 sq m at Logicor Stryków as part of an extension and expansion, while in Q4 2023 InPost opted to extend its 43,700 sq m deal at P3 Piotrków.
Hubert Wojtera, Director, Industrial & Logistics, AXI IMMO, said:
“In the take-up structure, logistics and distribution tenants dominate in all submarkets, but their unquestionable predominance is in Stryków and Piotrków Trybunalski, where the 3PL segment, i.e. logistics operators and retail, occupy more than 80% of industrial space in the region. Łódź and the surrounding areas are more diverse, but most manufacturing tenants are in the city.”
At the end of 2023, the vacancy rate in the Łódź voivodeship was 10.2% (+480 bps y-o-y), the highest among Poland’s five largest industrial markets. In absolute numbers, this meant more than 300,000 sq m available for immediate rental. In the first months of 2024, the vacancy rate remained at a similar level as at the end of December 2023. We expect a gentle downward trend in the vacancy rate in the following quarters.
How much does it cost to rent a warehouse in Łódź, and how much in the area?
In the Łódzkie Voivodeship, average rental rates ranged in a reasonably wide range from EUR 3.5 to EUR 4.6 per sq m/month. The cheapest location was Piotrków Trybunalski (EUR 3.2 to 3.6 sq m/month), while the most expensive was Łódź-city (EUR 4.1 to 4.6 sq m/month) for big-box developments. Similarly to other markets, effective rates are, on average, 15-25% lower, depending on the competitiveness of the properties offered in the location, the module’s size, and the lease’s length. The attractiveness of the Łódzkie Voivodeship remains high, as it is one of the most competitive regions in the country, even against those considered to be low-cost, such as the area within a 50-60 km radius of Warsaw, the vicinity of Poznań or selected locations in Upper Silesia.
Hubert Wojtera, concludes:
“The industrial sector in Poland and the Łódź Voivodeship shows solid foundations, but the global economic slowdown and rising operating costs will affect client attitudes towards investment in 2024. The long-term outlook points to further tenant growth, especially in the retail and distribution segments. We forecast a reduction in development activity, which should result in a downward trend in vacancy. Rental rates will remain stable, with a gentle downward trend in some locations.”
We recommend a refrigerated warehouse for sale Łódź Rzgów region, Łódź Voivodeship, Central Poland
About AXI IMMO
AXI IMMO offers comprehensive advisory services related to commercial real estate, including warehouse and office leasing and property management, real estate valuation, land acquisition, and sales. The firm also offers B2B and B2C supply chain management services. AXI IMMO’s greatest advantage is combining international business standards with deep local market knowledge. AXI IMMO has received numerous awards, including Best Local Agency of the Year in 2012 – 2019 and 2021 in the CiJ Awards and the award for Best Team in the warehouse sector in 2016 – 2017. In 2019 and 2023, the company won the Local Agency category in the CEE Investment Awards. AXI IMMO was named Local Agent of the Year 2023 in the CEE region at the CEEQA.
Report — At the centre of attention. Analysis of the industrial market in Central Poland
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