A big box opportunity
The first three months of 2006 have seen lease transactions signed for 82,000 sqm of office space in Warsaw. The largest part of it, 27,000 sqm, can be found in the CC-fringe area, whereas the least active parts were Lower-South (ul. Puławska) and the West (Wola district) with 300 sqm each. Some 99,000 sqm of new completions were added to the stock in Q1, which is a staggering amount considering that 120,200 sqm was delivered to the market in the whole of 2005. Some 56,000 sqm of this amount was provided by the Rondo 1 building in the city center. Other large developments were Trinity Park I, Topaz and Domaniewska Office Park Alpha, all adding up to 34,800 sqm in the Mokotów area.
Rents on the rise
Despite the general trend of plummeting vacancy rates in 2005, at the end of Q1 this year the vacancy rate was 8.7 percent - a slight increase on the 8.2 percent at the end of 2005. This increase was recorded in both central and non-central locations. However, experts forecast that rates will fall once more in 2006. At the end of 2005 rents fell across the city from EUR 18-21 (zł.70-81) to EUR 15-18 (zł.58-70) per sqm per month but started rising in the suburbs. According to Colliers International this will continue in 2006 and 2007, although a new, significant amount of supply will be delivered in the latter.
"Effective rents are now rising in all districts and, despite the large levels of new supply in the suburbs, we predict that effective rents will continue to rise in 2006," said the managing partner at Colliers International, Hadley Dean.
Big-box boom
While the good times for office tenants are coming to an end with landlords willing to raise rents due to the limited supply and decreasing vacancy rates, warehouse end-users are in a great position. "Poland is experiencing prolific growth in the warehousing and logistics sector. With competition fierce among developers, the end-users are seeing the benefit of this in low rents," says Dean. The market of warehousing, especially in Polish regional cities, only took off in 2005, and it is now making up for lost time. "Now is the best time to invest. We are at the bottom and everything must go up," says Dean.
Players on the industrial market benefit from the mass of flat empty land in Poland, which is much cheaper than space in Czech Republic or Slovakia.
"At EUR 4.5-5 [zł.17-19], rents across Czech Republic are significantly higher than in Poland," says Dean. Effective rents for large space in standard A-class properties in Poland are under EUR 3 (zł.12) per sqm.
Destination Silesia
The main trend now observable in Poland is regional cities catching up with Warsaw. Provided the absorption of EU funds for infrastructure is efficient enough to build motorways connecting the major cities of Poland, this trend will continue.
Analysts often point to the attractiveness of the Silesian warehouse market, stressing that distribution and automotive companies are more often leaving their locations in Czech Republic or Slovakia to set up distribution centers in Silesia from where they can supply both Polish and international markets. The demand for warehouse space in Silesia is unlike anywhere else. "If you build a warehouse in Silesia it is fully leased at once," says Dean.
