The difference in yield spreads in the industrial property in the UK and in Poland

When I speak to people about why the yields are so different, they come up with two arguments:

1.  They say UK is a bigger market

2.  You can see a rental growth has a consistent history in the UK

 

So let’s unpick the fact that the UK is a bigger market than Poland. Of course you’ve got 68 million people versus 38 million people. Of course when you look at the total stock in the UK it’s a much bigger market.

What many people don’t know in Poland is that for the last three years to total take up has been greater than the UK’s.  So for example this year it’s 5 million square meters in Poland versus about 3 million square meters in the UK.

Poland has become a proven and trusted  manufacturing & logistics hub for Europe. And this is why we are seeing record levels of demand and that’s why Poland is also now the second  fastest growing logistics market  in Europe

So now let’s tackle rental growth. The fact that the UK has seen for the last 5 to 7 years amazing growth in demand  which mainly has been led by online occupiers.  And this is because the Savills’ forecasts that when online sales goes above this magic number of 10.5%, you see a threefold increase in demand in the market.

Now, Poland in the last 3 years: online sales has gone up from 7 to 8  and to 9.5. So I expect that Poland will get a 10.5% next year.

When you combine that with the fact that we have a very young population, with high consumer spending, and the fact that the government has some of the lowest GDP to debt ratios in Europe, I’d say the future is here. And the prospects for rental growth are much higher here than in the UK.