Dot-com start-ups' space requirements boost office demand
A growing number of newly created internet and information technology (IT) companies have been boosting demand for Warsaw office space, property sources said last week.
"Large numbers of IT companies are looking to do start-ups," said Richard Sexton, head of Knight Frank Nieruchomosci's office agency.
In early April, the agency settled internet company Sonet.com Mobile Services in a renovated office building at ul. Fredry 6. Sonet signed a deal to lease 300 square meters in the building for three years. Asking rent in the Fredry building is $26 per square meter, according to Knight Frank, which represented the landlord, Opera Holding, in the deal.
Sonet had previously occupied offices within the Warsaw Financial Center operated by the Regus Business Center, which specializes in "instant" offices for tenants. Currently about 30% of Regus tenants are IT companies, according to Regus sources.
Knight Frank's Sexton said that start-up companies, which employ anywhere from three to 40 people, typically rent villas, flats, or Regus-run offices.
"Regus is perfect for start-up companies," Sexton said. Regus has Warsaw business centers in the Sheraton Warsaw Hotel and Towers, Atrium Plaza and Warsaw Financial Center. The company typically picks buildings with high-quality telecommunications facilities, thereby making its centers attractive to telecom tenants.
As IT companies grow, however, they are likely to go to permanent offices, Sexton said. "When they look for a long-term commitment in Warsaw ... it becomes more logical for them to move to long-term space," he said.
Slaski eyes int'l financial tenants
International financial institutions are the most likely tenants for the DM 88.5 million office building at ul. Chorzowska 50 in Katowice, which is currently being developed by Centrum Banku Slaskiego, a company owned by Bank Slaski and Luxembourg-based Buildco, property sources said.
"There are some firms needing prestigious offices," said Marek Wachowski, a Katowice-based agent with the Henry Butcher agency. He added that international financial institutions with Polish head offices in Warsaw needing regional offices in Katowice are the most likely tenants for class-A space in that city.
The Chorzowska development will be one of the first class-A office developments in Katowice, he said.
While the city already features some class A modern office buildings, these were usually developed for their own needs by companies such as Bank Handlowy and BRE Bank, which then took most of the building space.
The ulica Chorzowska 50 project is also being realized by a bank looking for headquarters. Bank Slaski will occupy the project's 28,000-square-meter building, but it will also develop a 45,000-square-meter commercial building containing 17,000 square meters of net office space.
DTZ, the project's exclusive marketing agency, said that although no tenants have signed up yet, the potential demand is there. "It's looking up. People want to be in modern office buildings," said Erik Drukker, a DTZ agent.
Other property experts agree that demand for first-class office space in Katowice exceeds supply. "There are no typical developers' buildings," Wachowski said, referring to projects developed so as to be leased to clients.
The Chorzowska 50 project will have asking rent of DM 45 per square meter. "It is not cheap but it's (also) not so much," said Wachowski.
Currently, prime office space in renovated buildings in Katowice typically costs $40-$50 per square meter a month.
The Chorzowska 50 development will be competing for tenants with the 15,000-square-meter Katowickie Centrum Biznesu building, which is also located on ulica Chorzowska and currently under construction, Wachowski said.
Belgian Besix and Polish NDI are the Chorzowska 50 project developers. Cocefi, a Polish-Belgian joint venture, is the general contractor for the whole investment, and Tishman Realty & Construction International is the owner's representative and is supervising the construction.
All of the above-mentioned companies were involved in developing Warsaw's Pulawska Financial Center.
Downtown competition heats up
German developer Mahler, which is attempting to attract the first tenants to its ulica Wspolna office building in Warsaw, last week ceased their cooperation with the DTZ agency, which had acted as the building's exclusive agents.
Mahler's actions coincided with those of another developer of a centrally located building, Raiffeisen Bank, which appointed the Jones Lang LaSalle agency to market commercial space in its Raiffeisen Business Center building.
Both moves highlight the competition among medium-sized office buildings slated to open in central Warsaw in the near future, including Wspolna, Raiffeisen Business Center, Roma Office Center, and Stratos.
"The majority of those buildings are empty," said Andrzej Mikolajczyk, Mahler's marketing manager. His company's 7,200-square-meter Wspolna building is due to open in June.
Mahler decided to dismiss DTZ as sole agent and invited all agents, including DTZ, to introduce possible tenants. "We need to have access to all potential clients," said Mikolajczyk. "Everyone is trying to adjust to the market."
Raiffeisen Bank took a different approach, hiring Jones Lang LaSalle as an exclusive agent to market 4,500 square meters of office space in its building, the agency announced.
The more than 16,000-square-meter Raiffeisen Business Center, located at the crossing of ulica Krucza and ulica Piekna, is due to open in September. Investor and anchor tenant Raiffeisen Bank Polska will occupy some 11,500 square meters. Asking rent for the remaining space is $32 per square meter a month, Jones Lang LaSalle said.
Geant launches paper program
Geant Polska, the Polish unit of the French hypermarket operator, earlier this month launched a zl. 200 million ($48.8 million) commercial paper program to finance the operations of its 11 countrywide outlets, the company said.
Geant decided on the short-term debt issue because it is less expensive than bank loans, and the visibility such a program brings could help raise future financing, said Pawel Gradzik, a financial analyst with Geant Polska.
The three-year program, with bonds valued at zl. 500,000 and maturity ranging from three months to one year, is managed by lead arranger Citibank and co-arrangers West LB Bank and Credit Lyonnais, Gradzik said. He added that all zl. 200 million has been placed since the program's launch.
Geant is the second French hypermarket operator in Poland to finance its needs in this way. Carrefour launched a zl. 300 million ($76.9 million) commercial paper program last year.
Housing picking up
The residential construction market is picking up, according to figures released by the Central Statistical Office (GUS).
In the first quarter of 2000, there were 19,100 apartment completed throughout the country, 24.4% more than in the same period last year. The number of apartments completed in first quarter of 2000 is the highest since 1994, GUS said.
The growing number of residential completions in the first quarter of 2000 also reversed the 1999 downturn, when the number of completions was lower than in 1998.
But there are more indications that the residential market is picking than GUS' figures on completed projects, said the government's Housing and Urban Development Office in a press release.
The institute said that last year, the number of started residential projects reached 133,600 units, 42.3% more than in 1988. The large number of projects begun last year could translate into an increased number of residential completions in 2000 and 2001.
The number of projects planned for development is also increasing, the Housing and Urban Development Office said. Last year, municipalities granted 37.3% more construction permits for residential projects than in 1998, the office said. A construction permit obtained from local municipal authorities is the key condition for starting any construction.
