Agents hope to lure KPMG from Daewoo Tower
KPMG's delayed move to the Warsaw Trade Tower has prompted landlords and real estate agents to try to attract the Big Six accounting firm to their buildings, property watchers said last week.
In early June, KPMG will decide on whether to stay with its plan to move to the Warsaw Trade Tower or rent other offices. "By the first week of June we will have to have a plan," said Greg Doyle, managing partner of KPMG Polska.
Last year KPMG signed a contract with the developer Dae-Pol to lease about 6,000 square meters in the Warsaw Trade Tower. But since then Dae-Pol whose owner Daewoo has financial problems has not been able to raise enough money to complete the building's interior fit out.
"Our problems are well known," said Antoni Bartnik, assistant director of Dae-Pol. He said the developer had postponed KMPG's move from April to June because of financial difficulties and "it (the move) might be delayed again".
KMPG said it still planned to move to the Warsaw Trade Tower. "I'm optimistic," Doyle said. "We would still like to be there." But he admitted that there has been little sign of progress at the tower. "It's been on hold for some time, and it's still on hold," he said.
In looking for funds, Dae-Pol has considered several options, including selling the building, Bartnik said.
But KPMG needs a quick solution; it has to leave its two and a half floors, or 2,500 square meters, of offices in the LIM Center in Warsaw by mid-September, Doyle said.
The LIM Center cannot extend KPMG's contract because it has already leased the area to other tenants including the Marriott Medical Center, which is increasing its space in the building, said Jerzy Karwowski, director of the LIM Center. "We are aware of their (KPMG's) problems," Karwowski said. KPMG is LIM's biggest tenant, so the landlord is not likely to push it to leave. "We're treating them with respect," Karwowski said. However, LIM expects KPMG to leave by early fall, he added.
KPMG's problems have attracted the attention of landlords and agents for buildings in central Warsaw who are hoping to lure a tenant needing up to 6,000 square meters of office space. "All agents in town are talking to them," said Jeroen van der Toolen, head of the office agency at DTZ.
KPMG confirmed that it has interest in Reform Plaza, the Elektrim building, Nordic Park, Stratos and Renaissance Tower. "We have been looking at other options," Doyle said.
Residential sector set
to boom in Warsaw
Total investment in new residential construction in the Warsaw area is expected to reach $2 billion over the next two years, according to the "Warsaw Residential Market Report" issued last week by Arthur Andersen and local consulting firm Reas Konsulting.
The report said the investment will double the number of apartment completions in Warsaw this year as compared to 1999. The number of new apartments will reach 16,000 units this year, 80% more than the 8,800 completed in 1999.
In the Warsaw metropolitan area, both housing cooperatives and development companies plan to finish approximately 20,000 units annually in 2000 and 2001, according to the report.
But an increase in supply could put pressure on developers, which in the past typically didn't have difficulty selling out their projects, the report said. "This dramatic increase in supply will significantly increase the competitive nature of the market. Less attractive projects may face marketing challenges and longer absorption periods," the report stated.
"This information is better for buyers, not for developers," said Kazimierz Kirejczyk, president of Reas, which advises residential developers. "The market is becoming normal," he said.
However, increase of supply is not likely to lower prices immediately. "We don't think it will result in significant price decreases," he said. "It's rather going to be a stabilization of prices," he said.
Despite the market starting to favor tenants, developers are not likely to scrap the practice of charging buyers in stages, according to completed work. "This trend won't disappear soon," Kirejczyk said. By charging buyers as work is completed, residential developers still enjoy a very high return on capital simply because they invest very little of their own capital, he said.
As much as 75% of new housing development in Warsaw comes from low-end projects costing less than $900 per square meter, the report said. The most popular areas for low-end project development include the districts of Bialoleka in northeastern Warsaw, followed by Ursynow and Praga Poludnie in the south.
The mid-priced housing segment, with apartments priced $900-$1,400 per square meter, accounts for 22% of total new projects in Warsaw, the report said. The most popular area for these apartments is Ursynow, which attracts as much as one-fourth of mid-priced apartments.
The high-end apartment sector, which runs more than $1,400 per square meter and makes up 4% of the total market, has been declining due to falling interest in high-end rental accommodation, Kirejczyk said. About 90% of high-end apartments are built in Warsaw's Gmina Centrum, primarily in Mokotow, the report said.
In the near future, the high price of land in central Warsaw could draw more residential developments to cheaper suburban destinations including Piaseczno, Marki and Zabki, Kirejczyk said.
In the longer term, however, residential developers are likely to push for the re-development of central and currently neglected districts of Zoliborz Przemyslowy and Praga Polnoc, increasing the number of new housing projects there, Kirejczyk said. "This move will happen," he said.
Liebrecht & Wood sells Manhattan to Ceresco
Belgium-based real estate fund Ceresco (Central European Real Estate Company) purchased the Manhattan Business & Distribution Center office and warehousing project in Warsaw from developer Liebrecht & Wood, the developer announced.
The value of the transaction wasn't revealed but Liebrecht & Wood also Belgium based said Ceresco's investment has an internal rate of return of 14.5%.
No source at Liebrecht & Wood or Ceresco which manages a o49 million fund eyeing property investment in emerging markets was available for comment at press time.
Manhattan Center currently has 16,924 square meters of warehousing space and 6,604 square meters of office space. The project is leased to tenants such as Nissan, Hella, Castrol, Xerox, Levi's, Flexonics and Euro RTV/AGD, Liebrecht & Wood said.
Ceresco's acquisition includes a new phase of construction, which will add 12,789 square meters of warehousing space and 2,427 of office space, to be completed in February next year. The new phase has already been pre-leased to Euro RTV/AGD, Liebrecht & Wood said. After the expansion, the total size of the project will be 38,744 square meters located over 73,545 square meters of land.
