Looking to the future
The latest research on the commercial real-estate market by PricewaterhouseCoopers (PwC) paints a positive picture, with growth in the office, retail and warehousing markets linked to specific submarkets.
The next few years will see stable new supply in the Warsaw office market, according to PwC's research, and a slight increase in vacancy rates. Many developers are now focusing on large mixed-use developments, combining office space with retail and services functions. Smaller schemes, with pre-lease agreements, are also very attractive and help to limit risk for investors.
Developers are continuing to look beyond the central business district in Warsaw, but they are not yet willing, for the most part, to make the transition to the regional towns and cities. Vacancy rates are still hanging around 20 percent in regional centers. In Warsaw, monthly rent levels remain at between EUR 15-22 (zł.58-85) per sqm, but drop to EUR 15 (zł.58) in Katowice and EUR 12 (zł.46) in Łódż and Wrocław.
Regional offices
Outsourcing is the main driving force behind demand in the regional cities, with approximately 400,000 sqm of modern office space in the five major cities outside of Warsaw.
The most promising markets are Wrocław, Kraków and Poznań, with Wrocław currently on top. The city has worked hard this year, and it launched a high-profile media campaign to promote itself as an investment destination. Several international companies have committed to major investments in the city, including: Remy International, which is opening a $2 (zl.6.5) million research center; Volvo, which is investing zł.25 million; and Hewlett Packard is putting $50 (zł.163) million into a financial services center. Throughout the country, the public sector is expected to stimulate demand in the office market.
Shop till you drop
Although investors are unwilling to branch out in the office sector, there is plenty of demand for regional retail space. With the shopping-center market largely saturated in Warsaw, second- and third-tier cities are now attracting investors' interest, with Trigranit's Silesia City Center leading the next stage in retail development.
Large surface stores and small compact shopping centers will continue to crop up in regional towns, according to PwC, and a number of existing centers will renovate their premises to stay competitive. The report also expects entertainment space to develop further, even within smaller schemes, with the focus on modern cinemas. DIY stores are expected to increase in popularity as economic growth means more Poles will be willing to spend money on home improvements.
Factory outlets were one of the success stories of 2005, and both Neinver Polska and the Factory Outlet are expected to build on their growth. Discount chains, such as Biedronka, Leader Price, Netto and Lidl, are also expected to develop further throughout the country.
Big boxes
Warehouse development goes hand in hand with infrastructure development, and as Poland upgrades its road network, the industry can expect warehouse developers to follow suit.
However, other areas in Central and Eastern Europe (CEE), such as northern Czech Republic and the area around Brno, Prague and Bratislava, could prove tough competition for Polish logistics operators. Currently, Poland is still undercutting most of these areas on the price front.
PwC expects the warehouse market to become more decentralized, and several main hubs will emerge around Warsaw, Łódż, Poznań, Katowice, and Wrocław.
Although the market is very attractive, with new developers very active, demand and supply is balanced fairly evenly. However, much of the new supply is in build-to-suit projects, and an increase in new speculative warehousing developments is expected to lead to an increase in the vacancy rate. The development of the retail market should have a knock-on effect on the logistics front, with retail chains expected to fuel demand for warehousing space in the regions.
