Institutional investors vying for properties in Warsaw

Real estate agencies predict a battle between institutional investors for properties in Warsaw's central business district, fueled by the prospect of growing rents and limited new construction. With 7.6% of office space in Warsaw's central business district currently available for rent and only three new buildings making their market debut in 2002, real estate agents see rental prices finally beginning to stabilize this year. According to data from U.S. real estate agency Jones Lang LaSalle (JLL), rental prices in other European capital cities are falling or slowing in growth, making Warsaw an increasingly attractive location for large institutional investors such as pension funds, banks, insurance companies and investment funds - groups that want to make a profit on real estate investments. "We're at a point now where there is a queue of investors who are looking at Warsaw," said Jason Sharman, head of the JLL's office and industrial agency. Prime market According to Jeroen van der Toolen, deputy managing director at international real estate agency DTZ only 43,000 square meters of prime quality office space were delivered in the central business district in 2001, of which 13,000 square meters are still vacant. Van der Toolen anticipates that total supply in the city center this year will reach 60,000 square meters, although only three new buildings will be completed in the central business district: Centrum Królewska, developed by a consortium of Polish travel agency Orbis and telecommunications firm Polpager, Piźkna 24 from Tryboń PTI, and Marszałkowska 76 from SAP Projekt. "I don't believe that the rents for high-quality office space will go down further because when you look at the supply on the market, there is not a lot available in the central business district," van der Toolen said. "Anyone looking for 1,300 square meters of prime office space will not have a lot of options, which explains why developers are holding their rent levels - not a lot of new supply is going to be delivered." In the medium term, demand for office space in the central business district will increase as Poland moves toward European Union accession, when the introduction of new taxes and laws will expand the operations of accounting and law firms as more firms will require advice, Sharman said. "But the supply is really restricted, so what we will find is that in 2002-2003 there will be some bidding for properties that will mean that … there will definitely be some very good prices paid for product this year," Sharman said. The most recent institutional transactions in Warsaw have included the purchase of Saski Point by Austrian property fund Europolis Invest Immobilien Management from U.S. developer AIG Lincoln and the 23,550 square-meter Kopernik office building developed by Belgium-based developer Liebrecht and Wood, which was sold to German property fund Deutsche GrundbesitzInvestmentgesselschaft.