Rents coming down, but still no real bargains for Warsaw firms
Rents for class-A office space in Warsaw continue to be among the most expensive in Europe this year and run slightly less than major financial centers such as London, Frankfurt and Paris, according to a report released in May by Healey & Baker, the U.K.-based property consulting firm (see table). Moreover, given the 9% drop this year in annual rents here to $531 per square meter, Warsaw ranked second just after London in 1998, according to the report.
Of course, high rental bills are nothing new to companies doing business in Warsaw.
"Rents are historically high in Warsaw," said Roger Saper, managing director of Jones Lang LaSalle property agency.
The high cost of renting office space in Warsaw dates back to the startup of the real estate market here in the early transition years. Since the early 1990s, investors establishing a presence in this emerging market faced a dearth of modern space and paid premiums to shelter headquarters in the likes of the LIM Center (Marriott Hotel building), the glass palace on Plac Bankowy (a.k.a. the Sony building) and the Intraco tower north of city center.
With the growing tide of businesses and the absence of any matching increase in supply of offices, Saper said, "rents escalated out of proportion."
Now with more offices coming to the market, rents are coming down and businesses are beginning to feel some of the benefits and are renegotiating lease contracts. But there are limits to how far down rates will go, property watchers said.
"It's supply and demand," said Douglas McMurray, managing director of Colliers International.
Demand is still strong in Warsaw, where companies set up their headquarters to tap into Poland's 40 million consumer market.
The size of the market is largely why rents in Warsaw are higher than in Prague and Budapest, McMurray said. Rents here run 36% higher than in Prague, 60% higher than in Budapest and also higher than in many recognized Western European business cities including Amsterdam, according to the Healey & Baker report.
But market size, and the resultant demand, isn't the only factor pumping up the cost of space. Another reason for the premium in Poland is the high interest rates here compared to Western Europe, which makes developments more expensive. "The cost of lending here is much higher," said Rhys Jones, managing director of DTZ Debenham Zadelhoff.
Although most property developers take loans offshore in dollars or the euro, lenders charge higher rates to finance projects here because of risks associated with emerging markets, Jones said.
The increasing supply of new and renovated office space will continue to put downward pressure on rents but not enough to bring prices down to levels in other regional capitals.
"Rents will continue to go down for the next year and a half," said McMurray of Colliers.
But demand will brace against further drops.
"Warsaw is under-officed," said Saper of Jones Lang LaSalle. "Warsaw is a very good office center, potentially."
Rents here are expected to remain higher than in many European cities in the longer term, at least for the next five years, said Jones of DTZ. "A lot of people are expanding (their offices)," he said.
Of course, high rental bills are nothing new to companies doing business in Warsaw.
"Rents are historically high in Warsaw," said Roger Saper, managing director of Jones Lang LaSalle property agency.
The high cost of renting office space in Warsaw dates back to the startup of the real estate market here in the early transition years. Since the early 1990s, investors establishing a presence in this emerging market faced a dearth of modern space and paid premiums to shelter headquarters in the likes of the LIM Center (Marriott Hotel building), the glass palace on Plac Bankowy (a.k.a. the Sony building) and the Intraco tower north of city center.
With the growing tide of businesses and the absence of any matching increase in supply of offices, Saper said, "rents escalated out of proportion."
Now with more offices coming to the market, rents are coming down and businesses are beginning to feel some of the benefits and are renegotiating lease contracts. But there are limits to how far down rates will go, property watchers said.
"It's supply and demand," said Douglas McMurray, managing director of Colliers International.
Demand is still strong in Warsaw, where companies set up their headquarters to tap into Poland's 40 million consumer market.
The size of the market is largely why rents in Warsaw are higher than in Prague and Budapest, McMurray said. Rents here run 36% higher than in Prague, 60% higher than in Budapest and also higher than in many recognized Western European business cities including Amsterdam, according to the Healey & Baker report.
But market size, and the resultant demand, isn't the only factor pumping up the cost of space. Another reason for the premium in Poland is the high interest rates here compared to Western Europe, which makes developments more expensive. "The cost of lending here is much higher," said Rhys Jones, managing director of DTZ Debenham Zadelhoff.
Although most property developers take loans offshore in dollars or the euro, lenders charge higher rates to finance projects here because of risks associated with emerging markets, Jones said.
The increasing supply of new and renovated office space will continue to put downward pressure on rents but not enough to bring prices down to levels in other regional capitals.
"Rents will continue to go down for the next year and a half," said McMurray of Colliers.
But demand will brace against further drops.
"Warsaw is under-officed," said Saper of Jones Lang LaSalle. "Warsaw is a very good office center, potentially."
Rents here are expected to remain higher than in many European cities in the longer term, at least for the next five years, said Jones of DTZ. "A lot of people are expanding (their offices)," he said.
