Downtown struggles to compete with suburbs
As such it fetches the highest prices nationwide for commercial and residential real estate, and, despite that, there's land here for the taking. Well, almost. About 20% of the district's prime, downtown real estate is slated for development, but ownership problems and indecision at the city-management level stand in the way of clearing large tracts downtown.
In the meantime, developers are finding lots outside the city center, which has many wondering about the fate of downtown in years to come.
That's not to say the downtown hasn't attracted investment. Since the early 1990s, an estimated $2.5 billion has been invested in Warsaw's office sector and Srodmiescie has taken the lion's share. Two year's ago, for example, the number of building permits more than doubled over the previous year leading to completion of 15 major buildings last year, mainly office and retail projects. (See graph lower left, Number of building permits.)
But last year, requests for permits slumped back to pre-1997 levels. Property watchers warn that city officials need to redefine objectives for the district to attract new investment and stimulate business and retail activity, otherwise the migration to neighboring districts such as Wola and Mokotow will continue to draw away commercial activity.
"Warsaw's downtown lost a chance because of ownership problems and inflexibility in planning," said Janet Choynowski, managing director of Prime Property real estate agency. "It is a ghost town compared to other European capitals, where you have thriving retail, entertainment and restaurants - all after hours activities."
Perhaps the best example of stalled development is plac Defilad. The square is at the very center of town where metro and railways stations deposit commuters and tourists, but to date, there is no overall game plan for development.
"It is about how to connect it with the center," said Jerzy Iljaszewicz, director of the planning department in the Srodmiescie district. "We have to complete this as soon as possible."
But while there is a sense of urgency, few actual decisions have been taken. Plac Defilad is stuck at the planning stage, Iljaszewicz said. A group of Brussels-based architects have been working on a plan to develop the 29-hectare plac Defilad surrounding the Palace of Culture and Science.
One blueprint calls for construction of buildings throughout the site, but that entails pulling up open, green areas and pulling down an open-air market - proposals that are still debated heavily. The new mayor appears resolved to develop space along ulica Marszalkowska and has set an October deadline to move out vendors in the open-air market there. But the fate of the rest of the space has yet to be decided.
Once the city releases plac Defilad for development, private sector money would flow in, property watchers said.
Plac Defilad is not the only area waiting for development. Next year ING Real Estate is to start a massive project called the Zlota Center, a 150,000 square meter, DM 500 million mixed-use development located between the railway station and Holiday Inn. The project is slated for completion in 2002 or 2003. Also, U.S.-developer Hines has been trying to take off with its more than $100 million office development on plac Pilsudskiego, near the National Theater, said Ilaszewicz of the city hall.
Other areas include about 100 hectares in Polnocne Powisle and 129 hectares by the Warszawa-Gdanska train station, in addition to sites near the Warsaw Technical University (Politechnika-Metro) and along ulicas Hola, Mokotowska, Wilcza and Krucza. (See table, Development plans) But the city needs to complete planning procedures to release these areas.
"We won't see benefits for many years," predicted Choynowski of Prime Property.
In the meantime the city, which owns much of the existing property downtown, could manage its assets better, property sources said.
The city plans to sell off more than 200 stores, or 6% of more than 230,000 square meters of space downtown. But the plan faces hurdles, including the ability of existing tenants to come up with the necessary cash, and they have the only the right to buy the space. If they can't pay, turnover of the property remains a big question. Tenants generally have long-term, subsidized leases and cannot sub-lease store space. Moreover, there is no deadline in the city's plan to sell its 200 stores.
"The situation makes it almost impossible for serious retailers to take space even if they want to," Choynowski said.
It also limits city revenue. For example, monthly rents for city-owned retail outlets run up to $20 per square meter, whereas market rates could be as high as $100, she said. "Warsaw has cheated itself," Choynowski said.
Srodmiescie also plans to sell entire buildings and sites for development, but the sell off is snarled by ownership issues, especially related to pre-war owners claiming rights to downtown property. Even so, this year Srodmiescie plans to sell about 12 buildings or sites downtown, and envisions up to zl. 30 million ($7.69 million) in revenue from the sale, said Krzysztof Koral, a director of Srodmiescie's economic policy department. (See table, Property for sale)
But while city officials wrestle with ownership and planning issues, many new developments take root in Warsaw's suburbs, property watchers said. "It's easier to develop there," Choynowski said.
One break in the cloudy, near-term horizon might come with infrastructure. The central district has wanted to develop parking garages to relieve congestion downtown, but so far has failed because of lack of financing, said Krzysztof Przygoda, spokesman for the Srodmiescie district.
Earlier this month, however, the city began charging for parking space downtown. With officials promising to beef up enforcement and rates running in excess of zl. 400 a month for weekday space, or about 15-30% of the average monthly salary in Srodmiescie, revenue projections for parking downtown could become more predictable, giving banks and other financiers a little more security in taking the plunge into parking schemes.
In the meantime, developers are finding lots outside the city center, which has many wondering about the fate of downtown in years to come.
That's not to say the downtown hasn't attracted investment. Since the early 1990s, an estimated $2.5 billion has been invested in Warsaw's office sector and Srodmiescie has taken the lion's share. Two year's ago, for example, the number of building permits more than doubled over the previous year leading to completion of 15 major buildings last year, mainly office and retail projects. (See graph lower left, Number of building permits.)
But last year, requests for permits slumped back to pre-1997 levels. Property watchers warn that city officials need to redefine objectives for the district to attract new investment and stimulate business and retail activity, otherwise the migration to neighboring districts such as Wola and Mokotow will continue to draw away commercial activity.
"Warsaw's downtown lost a chance because of ownership problems and inflexibility in planning," said Janet Choynowski, managing director of Prime Property real estate agency. "It is a ghost town compared to other European capitals, where you have thriving retail, entertainment and restaurants - all after hours activities."
Perhaps the best example of stalled development is plac Defilad. The square is at the very center of town where metro and railways stations deposit commuters and tourists, but to date, there is no overall game plan for development.
"It is about how to connect it with the center," said Jerzy Iljaszewicz, director of the planning department in the Srodmiescie district. "We have to complete this as soon as possible."
But while there is a sense of urgency, few actual decisions have been taken. Plac Defilad is stuck at the planning stage, Iljaszewicz said. A group of Brussels-based architects have been working on a plan to develop the 29-hectare plac Defilad surrounding the Palace of Culture and Science.
One blueprint calls for construction of buildings throughout the site, but that entails pulling up open, green areas and pulling down an open-air market - proposals that are still debated heavily. The new mayor appears resolved to develop space along ulica Marszalkowska and has set an October deadline to move out vendors in the open-air market there. But the fate of the rest of the space has yet to be decided.
Once the city releases plac Defilad for development, private sector money would flow in, property watchers said.
Plac Defilad is not the only area waiting for development. Next year ING Real Estate is to start a massive project called the Zlota Center, a 150,000 square meter, DM 500 million mixed-use development located between the railway station and Holiday Inn. The project is slated for completion in 2002 or 2003. Also, U.S.-developer Hines has been trying to take off with its more than $100 million office development on plac Pilsudskiego, near the National Theater, said Ilaszewicz of the city hall.
Other areas include about 100 hectares in Polnocne Powisle and 129 hectares by the Warszawa-Gdanska train station, in addition to sites near the Warsaw Technical University (Politechnika-Metro) and along ulicas Hola, Mokotowska, Wilcza and Krucza. (See table, Development plans) But the city needs to complete planning procedures to release these areas.
"We won't see benefits for many years," predicted Choynowski of Prime Property.
In the meantime the city, which owns much of the existing property downtown, could manage its assets better, property sources said.
The city plans to sell off more than 200 stores, or 6% of more than 230,000 square meters of space downtown. But the plan faces hurdles, including the ability of existing tenants to come up with the necessary cash, and they have the only the right to buy the space. If they can't pay, turnover of the property remains a big question. Tenants generally have long-term, subsidized leases and cannot sub-lease store space. Moreover, there is no deadline in the city's plan to sell its 200 stores.
"The situation makes it almost impossible for serious retailers to take space even if they want to," Choynowski said.
It also limits city revenue. For example, monthly rents for city-owned retail outlets run up to $20 per square meter, whereas market rates could be as high as $100, she said. "Warsaw has cheated itself," Choynowski said.
Srodmiescie also plans to sell entire buildings and sites for development, but the sell off is snarled by ownership issues, especially related to pre-war owners claiming rights to downtown property. Even so, this year Srodmiescie plans to sell about 12 buildings or sites downtown, and envisions up to zl. 30 million ($7.69 million) in revenue from the sale, said Krzysztof Koral, a director of Srodmiescie's economic policy department. (See table, Property for sale)
But while city officials wrestle with ownership and planning issues, many new developments take root in Warsaw's suburbs, property watchers said. "It's easier to develop there," Choynowski said.
One break in the cloudy, near-term horizon might come with infrastructure. The central district has wanted to develop parking garages to relieve congestion downtown, but so far has failed because of lack of financing, said Krzysztof Przygoda, spokesman for the Srodmiescie district.
Earlier this month, however, the city began charging for parking space downtown. With officials promising to beef up enforcement and rates running in excess of zl. 400 a month for weekday space, or about 15-30% of the average monthly salary in Srodmiescie, revenue projections for parking downtown could become more predictable, giving banks and other financiers a little more security in taking the plunge into parking schemes.
