Record second half of Poland Warehouse Q DTZ Research PROPERTY TIMES. Contents. Author. Contacts

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1 DTZ Research PROPERTY TIMES Record second half of 214 Poland Warehouse Q February 215 Contents Macroeconomic background 2 Supply 3 Demand 4 Vacancy and rent levels 5 Definitions 6 The total supply of modern warehouse space in Poland at the end of 214 amounted to 8.8 m sq m which constituted an increase of almost 14 per cent compared to the end of 213. Greater Warsaw (2.8 m sq m), Upper Silesia (1.6 m sq m) and Lower Silesia (1.2 m sq m) remained the biggest warehouse hubs in Poland, accounting for 64 per cent of the total supply. In the second half of 214 developers delivered approximately 74, sq m of new supply, mainly located in Lower Silesia (circa 35, sq m) and (roughly 28, sq m). In 214 some 1.8 m sq m of new supply was delivered - the largest increase since 28 - almost all of it outside Greater Warsaw (comprising the 3 Warsaw zones). As of the end of 214, an additional 63, sq m of warehouse space was under construction, of which approximately 7 per cent has already been pre-let. The amount of leased space under construction decreased by approx. 2 pp (percentage points) compared to first half of 214. This was linked to an increasing amount of speculative warehouse space delivered to the market. Take-up volume in Poland amounted to 1.2 m sq m in the first half of 214 and 1.6 m sq m in the second half of the year. Total take-up for 214 equalled 2.8 m sq m, up by 18 per cent compared to 213. This good performance demonstrates the continually increasing demand for warehouse space in Poland. At the end of 214 the vacancy rate for Poland fell to a record-low of 5.8 per cent; down from 11.1 per cent as at the end of 213. The asking rent level did not change significantly in the second half of 214, however decreasing vacancy rates may result in upward pressure on the rent levels on some markets. Author Marcin Żuchniewicz Associate, Consulting & Research marcin.zuchniewicz@dtz.com Contacts Kamila Wykrota, Consulting & Research kamila.wykrota@dtz.com Magali Marton Head of EMEA Research magali.marton@dtz.com Hans Vrensen Global Head of Research +44 () hans.vrensen@dtz.com Figure 1 New supply and take-up, years (sq m ) New supply (sq m) Take-up (sq m) Property Times 1

2 (f) 215(f) 216(f) Poland, Logistics and Industrial, H2 214 Macroeconomic background Economic growth and inflation In 214, the Polish economy s rate of growth noticeably accelerated after two years of comparatively moderate prosperity. According to the National Bank of Poland s (NBP) estimates, GDP growth in 214 amounted to 3.2 per cent yearover-year, compared to 1.6 year on year growth registered in 213. In the first half of 214, Poland remained resilient to the political and economic unrest in Europe. However, in H2 of that year the continued decline in the economic activity of the European Union has curtailed the growth seen in the national economy through the tilting of the trade balance and the general sentiment in the enterprise sector. Consumption was the main component that boosted GDP. Due to improving labour market conditions and gradually increasing household purchasing power, the trend is expected to continue in the coming years. GDP growth forecasts for 215 and 216 oscillate around 3 per cent (3. per cent in 215 and 3.3 per cent in 216, according to NBP). In the period from January to November 214, the consumer price index amounted to.1 per cent, which is in line with the NBP s forecast of the average rate for the whole year. The low inflation rate results from the general economic situation, as well as supply factors, including a decrease in food and oil prices. As a result of the deflation observed since July 214, in October of that year the Monetary Policy Council reduced the reference rate by.5 pp to the level of 2. per cent. Low interest rates buoyed demand for credit and hence spurred consumption. Currency exchange The Polish zloty appreciated against the euro and the dollar over the first eight months of 214, but the trend was reversed in the months that followed. The exchange rates for both currencies have increased slightly to the level of 4.22 EUR/PLN and 3.43 USD/PLN in December 214. The weakening of the national currency is correlated with poor economic performance, especially in the Eurozone, and political tensions in the Polish economic environment. The exchange rate against the dollar is additionally influenced by the improving situation in the US economy. Trade balance Between January and October 214, Poland s export and import rates grew at a steady pace: 4.8 per cent year-overyear. The trade deficit reached EUR 1.1 bn. In terms of export, the most dynamic growth was recorded in sales to EU countries an increase of 7.5per cent year-over-year. Labour market The situation in the Polish labour market has markedly improved over 214. As of the end of December, the unemployment rate was 11.5 per cent, compared to 13.4 per cent observed in December 213. In 214 the average monthly salary in the enterprise sector increased to the level of PLN 3,98 up by 3.7 per cent compared to 213. Figure 2 GDP growth and inflation rate in Poland 8% 7% 6% 5% 3% 1% % Source: National Bank of Poland, (f) - forecast Figure 3 Export, Import and Trade balance (RHS) in Poland, EUR million Source: Central Statistical Office Figure 4 Average monthly salary in the enterprise sector (PLN) and unemployment rate (%) in Poland GDP growth Salary Source: Central Statistical Office Inflation rate Unemployment rate Export Import Balance on goods (RHS) 2% 18% 16% 1 1 1% 8% 6% % Property Times 2

3 Poland, Logistics and Industrial, H2 214 Supply The total supply of modern warehouse space in Poland at the end of 214 amounted to 8.8 m sq m and increased by almost 14 per cent compared to 213. Similar to previous years, almost 9 per cent of the modern warehouse space was located in the five biggest logistics hubs in Poland: Greater Warsaw, Upper and Lower Silesia, the region and central Poland (Łódź / Stryków area). At the end of 214 the majority of warehouse space was located in greater Warsaw (2.8 m sq m), Upper Silesia (1.6 m sq m), Lower Silesia (1.2 m sq m), the region (1.2 m sq m) and central Poland (1.1 m sq m). The high attractiveness of these locations stems from their close proximity to relatively big markets (Warsaw, Silesia, ) and their well-established positions as warehouse hubs, as well as the large number of existing buildings, which attracts further warehouse investment. On the other hand, we still observe an increasing amount of new warehouse projects in locations such as the Tricity area, Szczecin, Kraków, Lublin and Bydgoszcz. These markets are increasingly attractive due to new investments in infrastructure, access to seaports and container terminals (Tricity, Szczecin), convenient connections to new markets (Tricity Scandinavia, Lublin Ukraine, Eastern markets) and lower labour costs (Lublin, Szczecin). The total amount of modern warehouse space in these locations, as of at the end of 214, was 9, sq m and increased by more than 2, sq m (by approximately 3 per cent) compared to 213. This increase in the amount of warehouse space results from the delivery of several new projects (e.g. Logistic & Business Park Bydgoszcz, Kowale 3 in Gdańsk), as well as the expansion of existing ones (PPL Omega Pilzno, Park Gdańsk, North-West Logistics Park Lublin). Moreover, an additional 17, sq m of warehouse space is currently being developed in the aforementioned locations. Developers activity In the second half of 214 approximately 74, sq m of new warehouse space was delivered, which shows an increase of approximately 117 per cent compared to the first half of the year. The total amount of new supply in Poland in 214 equalled 1.1 m sq m, the highest amount since 28 (1.6 m sq m). The majority of new supply in the second half of 214 was delivered in Lower Silesia (approximately 35, sq m) and the (approximately 28, sq m). Almost all of the newly delivered warehouse space was located outside the Greater Warsaw. The largest projects delivered to the Polish market in the second half of 214 included, Wrocław and Wrocław South Logistics Centre, the sum total of which amounted to almost 37, sq m. At the end of the fourth quarter of 214 an additional 63, sq m of warehouse space was under construction, the majority of which was located in the area (214, sq m) and Upper Silesia (122, sq m). Table 1 Selected Project delivered in H2 214 Project Area (sq m) Developer Wrocław Wrocław South Logistics Centre Konin Clip Figure 5 Lower Silesia Lower Silesia Stock by regions in Poland, 214 (%) * Greater Warsaw see definitions Figure 6 New supply by regions (sq m) % 18% CLIP 1 13% Centralna Polska 3% 13% 1 5% Krakowa Dolny Śląsk Inne y Poznania Trójmiasta Górny Śląsk Warszawa Strefa I * Warszawa Strefa II * Property Times 3

4 Poland, Logistics and Industrial, H2 214 Approximately 7 per cent of the warehouse space under construction has been pre-let, which constitutes a decrease from the more than 9 per cent of space being pre-let at the end of the first half of 214. This indicates an increase in speculative warehouse space delivered to the market. Speculative warehouse space is usually only a part of larger logistics and industrial projects; standalone speculative warehouses remain rare on the market. Developers still focus on pre-let projects or built-to-suit schemes, which are adjusted to tenants specific requirements. DTZ expects that in the first half of 215 an additional 4, - 5, sq m of new supply will be delivered and that the total stock in Poland will exceed 9 m sq m. Demand A further strengthening of demand for modern warehouse space in Poland was observed in the second half of 214. Take-up during this period amounted to 1.6 m sq m, which represented an increase of 3 per cent as compared with the first half of 214 and an increase of 18 per cent as compared with to the second half of 213. Total take-up volume in 214 equalled 2.8 m sq m. The increase in the take-up volume results from the arrival of new key tenants (e.g., Amazon) and strong demand for warehouse space generated by e-commerce, logistics and FMCG tenants. Approximately 7 per cent of take-up related to new leases, while 3 per cent fell to renewals and 1 per cent to expansions. In H2 214 the highest volume of take-up was recorded in Lower Silesia (approximately. 28, sq m), Warsaw Zone 3 (approximately 24, sq m) and in Upper Silesia (approximately 235, sq m). These three locations accounted for almost 47 per cent of the total take-up volume recorded in Poland during this period. The average (leased) unit size remained comparable to previous periods and amounted to 5, sq m. A significant demand for small business units (SBU, units up to 6 sq m) has also been observed in greater Warsaw. Lease agreements relating to these types of units corresponded to approximately 24 per cent of the total take-up volume in all three Warsaw zones in the second half of 214 and resulted from strong demand for SBUs. Another factor that helped result in increased take-up in 214 was the further expansion of companies providing logistics outsourcing services. This, in turn, led to several relocations to new BTS schemes. DTZ expects that in 215 demand will be driven by both new e- commerce tenants and existing tenants, who will likely introduce new services and require additional warehouse space. Table 2 Major warehouse schemes under construction II Logistics Centre Project Area (sq m) Developer BTS Bielsko-Biała Park Sosnowiec North-West Logistics Park Segro Logistics Park Komorniki Pomeranian Logistics Centre Park IV Business Centre Łódź II Figure 7 Take-up Split, 214 (%) 11% 7% 82 4 Upper Silesia 45 Upper Silesia 43 3 Other s (Szczecin ) Waimea 4 8 Segro Tricity Central Poland % 17% Centralna Polska Krakowa 16% 15% 15% 3% Dolny Śląsk Inne y Poznania Trójmiasta Górny Śląsk Warszawa Strefa I Warszawa Strefa II Warszawa Strefa III Property Times 4

5 Poland, Logistics and Industrial, H2 214 DTZ predicts that the upward trend in take-up will continue in 215, and will exceed 1 m sq m of modern warehouse space in the first half of the year. Vacancy and rent rates Vacancy rates In the second half of 214 vacancy rates in Poland fell to the record-low of 5,8 per cent (at the end of 214). The vacancy rate at the end of 214 was lower by 3.2 pp as compared to the result from the end of H1 214, and almost two times lower than the rate from the end of 213 (11.1 per cent). A further reduction of the vacancy rate resulted from the higher number of new tenants in 214 (mainly from the e-commerce and FMCG industries) and the fact that the majority of new warehouse projects were built based on pre-let or BTS arrangements At the end of 214 the lowest vacancy rates were recorded in central Poland (4.4 per cent), Warsaw zone 3 (5.4 per cent) and the region, where the vacancy rate amounted to.6 per cent. The region was also characterized by the highest amount of space under construction. On the other hand, the highest vacancy rate was recorded in Warsaw Zone 1 (11.8 per cent, a decrease of 9.1 pp as compared with the end of 213) and other locations (e.g., Toruń), where the vacancy rate rose by 3.7 pp to 11.8 per cent at the end of 214. Rents Despite falling vacancy rates, strong competition between developers on the market resulted in stable rent levels. Prime rents compared with those noted in preceding years - did not change significantly in the second half of 214. Highest rent levels were recorded in Warsaw Zone 1 (EUR per sq m per month). High rent levels were also recorded in the Kraków (EUR / sq m / month, on average), Upper Silesia (EUR / sq m / month) and Tricity (EUR / sq m / month). The lowest rent levels were observed in Warsaw Zone 3, where they varied between EUR 2.3 and EUR 3.2 / sq m / month. Given the decreasing vacancy rates, DTZ expects slight upward pressure on the rent levels in some locations (e.g. the, Lower Silesia), while in locations such as Warsaw Zones 2 and 3 asking rents may decrease insignificantly. Figure 8 Vacancy rates , Poland (%) 2% 18% 16% 1 1 1% 8% 6% % Figure 9 Headline rents by regions, 214 (EUR per sq m per month) Tricity Kraków Upper Silesia Lower Silesia Central Poland Warsaw Zone 3 Warsaw Zone 2 Warsaw Zone 1 2, 2,5 3, 3,5 4, 4,5 5, 5,5 6, Property Times 5

6 Definitions Modern warehouse space Prime rent Take-up Greater Warsaw BTS SBU Modern warehouse, distribution, light industrial and manufacturing schemes offered for lease. Prime headline rent paid monthly for the modern industrial and logistics space in the best location. Total amount of the leased space (sq m) including new agreements, renegotiations and extensions. Deals should be recorded in the quarter they are signed. The Greater Warsaw area includes three zones: Zone 1 schemes located within Warsaw city limits, Zone km of the city centre, Zone km of the city centre. Built-To-Suit - scheme designed and built for a specific client according to his needs. Small Business Unit smaller warehouse units, usually tailored to a specific tenant Property Times 6

7 EMEA John Forrester Chief Executive +44 () Head of Central & Eastern Europe Alan Colquhoun Senior alan.colquhoun@dtz.com Consulting and Research Kamila Wykrota kamila.wykrota@dtz.com Capital Markets... Craig Maguire Senior craig.maguire@dtz.com Office Agency... Barbara Przesmycka barbara.przesmycka@dtz.com Retail Agency... Renata Kusznierska Senior renata.kusznierska@dtz.com Industrial and Logistics Agency Marc Le Bozec marc.lebozec@dtz.com Corporate Real Estate Services (CREM) Ian Scattergood Senior ian.scattergood@dtz.com Property Management... Christopher Rasiewicz christopher.rasiewicz@dtz.com Project and Building Consultancy Andrew Frizell andrew.frizell@dtz.com Disclaimer This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, DTZ can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to DTZ. DTZ February 215 To see a full list of all our publications please go to Global Headquarters DTZ Poland 77 West Wacker Drive Złota 59 St. 18th Floor 8th Floor Chicago, IL 661 USA Warsaw, -12 phone phone fax fax info@dtz.com info@dtz.pl Property Times 7