Brownfield

In terms of warehouse space resources, the Wroclaw region is currently the fourth most developed market in Poland. At present, the supply of industrial and logistics space in the examined region amounts to 1.44 million sq m.


1.Distribution Park Wroclaw

2. Eurologis Centrum Logistyczne

3. Gazowa Industrial Park

4. Goodman Wroclaw I Logistics Centre

5. Goodman Wroclaw East Logistics Centre

6. Goodman Wroclaw IV Logistics Centre

7. Goodman Wroclaw South Logistics Centre

8. Hillwood Wroclaw I

9. Hillwood Wroclaw II


10. Hillwood Wroclaw III

11. Panattoni Park Wroclaw II

12. Panattoni Park Wroclaw III

13. Panattoni Park Wroclaw IV

14. Panattoni Park Wroclaw V

15. Panattoni BTS Amazon Wroclaw

16. Prologis Park Wroclaw I

17. Prologis Park Wroclaw II

18. Prologis Park Wroclaw IV


19. Prologis Park Wroclaw V

20. Segro Industrial Park Wroclaw

21. Tiner Logistics Park

22. VATT Invest Wroclaw

23. Wroclaw Business Park

24. Goodman Wroclaw V Logistics Centre*

25. MLP Wroclaw*

26. Panattoni Park Wroclaw VII*

*Parks under construction & planned projects


Overview of the region

Linia

In terms of the industrial and logistics market, the Wroclaw region seems to be one of the most attractive destinations for investment in Central and Eastern Europe. The region benefits from well-developed road infrastructure including the A4 and A8 motorways and the S8 expressway.

Thanks to Wroclaw’s location in close proximity to the Czech and German borders, the region is often chosen by logistics operators and retail companies distributing products to Western Europe, including e-tailers. Additionally, strong activity within the Special Economic Zones and the favourable investment climate of Wroclaw City are both important drivers for manufacturing companies and influence the large share of foreign direct investment in the region. In terms of the FDI volume, Wroclaw is a leader at the country level.

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b-3

1 440 000 sqm

Total logistics and industrial stock


2,7 – 3,9 euro

Headline rents per square meter


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100 000 sqm

Supply under construction


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6%

Vacancy rate of total stock


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WAREHOUSE MARKET

Linia


Developers activity & new projects

During 2016, developers delivered ca. 130,000 sq m of new space in six new developments to the Wroclaw market. A new phase of Hillwood Wroclaw 3 (29,500 sq m) was the largest project finished during the year. Other schemes completed in 2016 were: Building 2 in Panattoni Park Wroclaw V (25,400 sq m), Building 2 in Panattoni Park Wroclaw IV (25,100 sq m), 24,500 sq m of additional space in Building 1 within Goodman Wroclaw IV Logistics Centre, 14,200 sq m in Building 1 within Panattoni Park Wroclaw IV and 10,300 sq m in Panattoni Park Wroclaw VII.

Throughout 2016, the Wroclaw industrial and logistics market has grown by 8%. As a result of its favourable location and good market conditions, the Wroclaw region is experiencing a dynamic growth phase. Currently, there is over 100,000 sq m of warehouse space under construction, out of which 63% (64,400 sq m) is not secured by pre-lease agreements.

Developers are taking advantage of the positive market outlook to begin speculative construction while the demand, as evidenced in tenant requirements for new space, is still growing. Three new developments commenced in Q4 2016: Hillwood Wroclaw 1 bis (26,900 sq m), a new phase of Hillwood Wroclaw 2 (18,500 sq m) and MLP Wroclaw (8,700 sq m). Other projects under construction are: 30,000 sq m of additional space within Panattoni Park Wroclaw VII, expansion of Prologis Park Wroclaw V (11,400 sq m) and Panattoni BTS Polkowice (6,500 sq m).


Leasing activity & vacancy rate

At the end of Q4 2016, the vacancy rate in the Wroclaw region reached the level of 5.6%, which translates into a 0.1 pp increase y-o-y. The vacancy ratio in the Wroclaw region remains on a comparable level to the average vacancy rate for Poland, amounting to 5.9% at the end of Q4 2016. The availability of vacant space is still limited, therefore encouraging developers to start new constructions.

Tenants’ interest in industrial and logistics space to lease is growing. Overall, demand for industrial and logistics space amounted to ca. 420,000 sq m in 2016, indicating an 83% increase when compared to 2015. New agreements and the expansion of existing clients accounted for 49% of the total leasing activity registered this year in the Wroclaw region whilst renewals amounted to 51%.

In 2016, the Wroclaw market was dominated by the logistics sector (31% of total leasing activity registered in the region). E-commerce business plays an important role and is expected to continue to grow as a consequence of the changing shopping preferences of consumers. It will result in a growing need for modern logistics space. Other industries active in 2016 were the automotive and FMCG sectors.

Currently, headline rents for warehouse space amount to 2.70-3.90 EUR/ sq m/ month. They are expected to remain stable in the coming months.


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Investment process

Investment via brownfield project may be more rapid and engage resources of an investor at a much lower lever both in terms of capital and staff, as a developer is responsible for the wide scope of responsibilities. The following three forms of brownfield investment may be distinguished as most common:

Leasing an existing facility

Brownfield investment via leasing allows to commence operations far more rapidly than in greenfield investments but offers only limited customization possibilities. In the majority of  cases the minimum rent term amounts to defined period of 3 years. Some developers allow to short the period.

Excepting existing building some developers offer pre-let opportunities as well, where all administrative steps and permits have been accomplished and construction starts just after a preliminary lease contract with a tenant is signed. In such cases the minimum rent period amounts 5 years and the building is delivered within a 7 to 9 month period from the day the pre-let contract is signed. Pre-let offers allow only limited customization possibilities, much narrower than in the case of BTS projects.

Brownfield Redevelopment

Brownfield investment via purchasing an existing industrial building and redeveloping it is often a good opportunity to acquire a facility at a significantly lower price (distressed assets), achieve faster start of operations (SOP) than in case of greenfield investment or establish activities in an already developed industrial location.

Potential brownfield redevelopment range from very modern buildings which require only minor fit-our works to 30-40 years old facilities, that need to be redeveloped significantly. Despite this,  it has to be noted that in many cases, where the main structure of the building remains intact, redevelopment projects can be accomplished faster (from 6 to 9 months) and with lower costs (even 20 – 30%) than greenfield projects.

Redevelopment projects need to be compliant with all construction law regulations. Although a significant scope of works can be started by using simplified procedures and designs.

The article was prepared by partner of Invest in Wroclaw – CBRE

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