Leases up, trading down

The latest research report from property consultancy King Sturge illustrates the slowdown in the Polish property investment market as a result of the global credit crunch. In 2007, the volume of trade on the Polish property market fell 40 percent to hit E3.07 (zł.10.65) billion. The drop is attributed to increasingly cautious investment strategies of institutional financiers, particularly with regard to secondary products on the commercial market throughout the CEE region.

Rising rents

The most dynamic sector in 2007 was retail, with rents per sqm rising to €100 (zł.347) on leases of at least 100 sqm for shops in central locations. Nonetheless, retail development in Warsaw and other large cities is expected to slow as the market becomes saturated. Currently, modern retail stock covers 1.3 million sqm in the capital. Investment yields for sales on existing retail properties have stabilized at levels of 5.50-5.75 percent.

Investment yields in other sectors have levelled out as well, with yields for office space currently standing at 5.25-5.50 percent and at 6.75-7.0 percent for industrial properties.

Last year Warsaw's office market also showed its highest-ever take-up, recording 500,000 sqm for the year. High demand combined with lowered availability caused rents to spike 30 percent last year, reaching E30 (zł.105) per sqm by the end of the year. Office market stock in Warsaw reached 30 million sqm and more supply is expected over the next two years, mostly in the non-central districts of Mokotów, Ochota and Okęcie.

Industrial activity

On the industrial-space market, half of Poland's total stock of 3.6 million sqm still remains in Warsaw. Vacancy rates remain low across the board, particularly for locations close to the city. Annual take-up was estimated at 1.3 million sqm last year - 36 percent higher than the previous year. Most development and new occupancy was focused in areas 10-30 km from the city center.

"Areas to the east of Warsaw are going to see a considerable amount of new activity for the industrial property sector in the next few years," the King Sturge report read. "Also, other Polish cities are catching up with the capital, particularly Poznań and Katowice," it added.

King Sturge has just opened a new office in Katowice in response to the high level of commercial leasing activity there. Currently, it serves as the sole leasing agent for TriGranit's Silesia Towers office development, Aviva's Millennium Plaza and Osier's Group's Cross Point in Żory.