Capital commercial offer
Poland's office-space market is still diversified in terms of the quantity and quality of stock, as well as its availability and rent level, shows a recent report by Jones Lang LaSalle (JLLS). It says this is a response to the growing interest by investors in office real estate in Poland's major cities.
The disparity between the central market of Warsaw and other larger cities of Poland, such as Kraków, Wrocław, Poznań or Łód, is striking, but investors and tenants are expressing more and more interest in the regional cities. The capital's offer remains much more attractive for potential tenants, especially when it comes to the diverse range of quality, location and price, which is wider in Warsaw than anywhere else in the country.
Outside Warsaw, office markets experienced a boom in 2000-2003, when 560,000 sqm of modern office space was delivered, mostly in Tri-city and Kraków. According to JLLS, since 2004 a gradual absorption of office space has been observed throughout Poland, accompanied by a small number of office-building completions.
In the pipeline
As a result, vacancy rates dropped and now oscillate between seven and nine percent in Warsaw, Poznań, Katowice, and Łód and four percent in Kraków, Wrocław, and Tri-city.
JLLS hopes 2007 will see some changes in this respect as most of the office buildings currently under construction will have been completed. The rise in vacancy should be particularly visible in Warsaw and Wrocław, where 350,000 sqm and 106,000 sqm respectively are now under construction.
The demand for modern office space is still on the rise - in Q1 of 2006 alone, 82,200 sqm was leased in Warsaw. In locations other than Warsaw, the demand is created by Business Process Offshoring (BPO) facilities, which are major companies' back offices or call centers, usually located in countries with lower labor costs. Phillips has its BPO in Łód, while Hewlett Packard and Volvo have located theirs in Wrocław. Larger consulting and audit companies often open their offices in regional cities.
"The office leasing market is responding to the significant demand we are currently witnessing. Vacancy rates across the country currently do not exceed nine percent, and prime rents for modern office space range from EUR 18-21/sqm/month in [zł.71-82] Warsaw City Center to EUR 11-12/sqm/month [zł.43-47] in Tri-city and Łód," said Anna Kot, the head of JLLS' office agency. JLLS points to Katowice as an interesting market, as rents there usually include service charges.
Changing hands
JLLS also highlights the development of the investment market.
This year has already seen eight office-building sales in Warsaw and one in Kraków. Last year the number reached 27 deals, five of which were outside Warsaw, including: Alfa Plaza in Gdynia, Winogrady Business Center in Poznań, Lubicz Office Center in Kraków and Quattro Forum in Wrocław.
The investors' interest resulted in yields dropping to 5.5 percent in Warsaw and seven percent in other cities.
