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During the decade, the warehouse stock in Poland has more than tripled - from 6.3 million sq m. at the end of 2010, to almost 21 million sq m. in 2020. This booming real estate sector is showing signs of maturity. This is evidenced by, inter alia, new formats appearing especially in the largest agglomerations. An example is the segment of city warehouses, which are jointly analyzed by JLL and SEGRO in the report "Logistics Avenue: city logistics in Poland".

- City warehouses in Poland are becoming more and more popular among customers. Recent years have brought a significant increase in new investments in this format, and in the SEGRO portfolio such projects account for as much as 67% of the total value. The development of city logistics is the result of, inter alia, growing population in agglomerations, the development of the e-commerce industry and the trend of same day delivery, i.e. same day delivery - as well as the transformation of supply chains - comments Bożena Krawczyk, SEGRO Investment Director for Central Europe.

City warehouses, i.e. what?

Urban logistics resources are designed to be located within city limits. However, this is not a fully exhaustive definition.

- Until recently, most city warehouses in Poland were designed as standard "big-box" facilities, which are not necessarily directly related to the city's logistics services. However, the warehouse stock within city limits also includes a range of mixed-use alternative formats with a predominant warehouse function. Therefore, in order to correctly classify, one should take into account not only geographical criteria, but also functional and technical ones - explains Tomasz Mika, Director of the Warehouse Department, JLL.

Therefore, the types of operations performed in such warehouses that are usually used for sorting and distribution are important.

- In many cases, especially in relation to the largest retail chains, urban storage space complements much more complex logistic chains, handling deliveries of the so-called last mile. This is reflected in the smaller sizes of the individual modules. For example, in Warsaw, the average size of new transactions since 2018 has been around 2,000 sq m, compared to 6,000 sq m. in suburban locations - adds Maciej Kotowski, Market Analyst, JLL.

Other features of the urban warehouse include a much larger share of modern office space (up to 20-30% GLA), dedicated parking spaces, as well as more and more commonly used solutions in the area of sustainable development and placemaking.

Demand for city warehouses is becoming more and more sophisticated

- The urban logistics market is dominated by tenants from the logistics, retail and related industries such as FMCG, food and electronics. Nevertheless, manufacturing companies, trying to take advantage of the proximity to urban areas and a wider access to qualified workforce, also generate a significant part of the demand - comments Waldemar Witczak, Regional Director of SEGRO.

Growing purchasing power, increasing online trade drive the demand from courier companies. Their previously observed expansion model consisted mainly of building their own facilities to fill gaps in global supply chains. Today, in parallel with the huge increase in the number of parcels to be delivered, these companies increasingly prefer to rent warehouse space.

- It is expected that the structure of demand for urban facilities in Poland will slowly transform towards the one observed in Western Europe, where warehouses of this type attract start-ups, companies focused on new technologies, data centers and niche producers, as well as operators of research laboratories. -developmental. This will make the segment of warehouse properties located within city limits even more diverse and sophisticated - adds Waldemar Witczak.

The changing purchasing needs of Polish consumers will also continue to contribute to the development of this market segment.

- The growing volume of online sales in Poland, which additionally accelerated due to the pandemic, will certainly become the main driving force behind the new demand for last-mile facilities and developer activity, the more so as the sector is already facing an insufficient supply of the product. This applies to both cross-docks, small courier hubs and new mixed-use formats, which can also cover old industrial, commercial and office buildings in city centers - explains Bożena Krawczyk.

The market is just starting out

The supply of city warehouses in Poland is approximately 1.6 million sq m, which accounts for nearly 7.5% of the total commercial logistics and industrial space in Poland.

- Interestingly, most, because as much as 70% of the supply located in cities, is still standard big-box warehouses. A significant part of the market (over 20%) is also SBU (Small Business Units), i.e. buildings offering small business modules. Cross-dock warehouses, which are mainly used by courier companies, are also becoming more and more popular. Projects vary in size, shape, technical specification, etc. This proves that there is no one-size-fits-all template for a city warehouse, which makes new speculative investments more difficult. However, the unflagging demand, combined with the growing interest in city locations among investors, allow us to look to the future with a great deal of optimism. Since 2015, city warehouses accounted for approximately 11% of the transaction value in the warehouse sector. However, taking into account the dynamic urbanization and changing consumer behavior, we can expect that their share will grow in the coming years - comments Tomasz Puch, Director of the Capital Markets Department, JLL.

Warsaw has the largest share (40%) of city warehouses. The second place is occupied by Upper Silesia, which is gaining thanks to the developed road infrastructure in the vicinity of major urban areas. The third largest market is Łódź, which can be attributed to the size of the agglomeration, historical development and industrial character of the city.

- The city logistics market has great growth potential. Another 1.8 million sq m is under construction. logistics and warehouse space, of which 80% in the largest agglomerations and around them, and over 25% inside cities. In Warsaw, 26% of the space under construction falls on the administrative borders of the capital - adds Tomasz Mika.

Historically, the vacancy rate in parks classified as city logistics has changed significantly - from 0% to 22%, which can be explained by a relatively low supply (base). However, the total vacancy rate rarely exceeded 200,000 sq m. For example, in December 2020 it amounted to 230,000 sq m, which accounted for approximately 9% of the stock.

Rents

The amount of rent depends not only on the location itself, but also on the terms of the lease, technical standard and many other factors. The cheapest warehouses located in the city offer space for 0.5 euro more than the best properties in the suburbs.

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