The rise, or the fall, of residential property prices - that is the question
But what about prices? Here, opinions diverge.
Some forecast prices for residential properties in Warsaw will fall. The reasoning: Increased supply will put downward pressure on prices. But that assumes supply outpaces demand. And demand, the other side counters, is about to be unleashed by the fledgling mortgage market, which could force prices even higher.
To support the falling price hypothesis, Maciej Nowotny, consultant with Relocations Services Poland, noted that the prices of new apartments have already stopped growing. And that is a positive direction for the market, said Nowotny, who expects prices to fall 5-7% annually over the next couple of years.
"There is no reason for market (prices) to go down," countered Peter Choynowski, chairman of Prime Property. "If the mortgage is available, everyone will try to leave those horrible Russian blocks."
Mortgages would keep prices going up, or at the least, would stabilize prices at the current level, he said.
Recent history supports the price rise argument. Since the early 1990s, residential prices in Warsaw have steadily climbed. The current per square meter sale price for downtown apartments runs zl. 4,000, more than double in nominal zloty terms from about zl. 1,800 in 1995, or up about 40% in dollar terms, according to figures obtained from Unikat real estate agency and dollar exchange rates. (See Lokale Immobilia, March 8)
Nowotny said that until this year there was no sign that prices could stop rising. "Everyone looked for an end to this spiral and some thought there is no end," he continued.
But the upward spiral is gone, he said. Owners who maintain high prices simply cannot sell their apartments.
Last year more than 6,000 apartments were completed in Warsaw, nearly 50% more than in 1997, according to the Warsaw Statistical Office. Unikat predicts that the number of apartment completions will reach 10,000 annually by the end of next year. About 100 residential projects, ranging from a few to several hundred dwellings, are now under construction, Nowotny said.
But Prime Property's Choynowski downplayed a sudden glut of new residences. It will take a long time before supply hits the market, he said. "There is intention to build. But you have to wait and see."
Renters market
Falling office rents in Warsaw could prompt landlords to start offering incentives to attract tenants. But even strong marketing campaigns won't save some developments from bankruptcy, according to Colliers International's global chief, who last week visited Poland as part of his Central European tour.
"I don't think it's the end of the world," said John McLernon, Vancouver-based chairman of Colliers International. The days of five-year returns on investment, or 20% return rates, are gone for good, he said. The flip side is it may be a sign of maturity.
In developed markets such as Canada, rates of return run 5-6%. The Polish real estate market will go in the same direction, which also means some buildings would default on loans, in other words, go bankrupt, McLernon said. "It's more of a standard market," he said. "It's going to be good for tenants."
Already, landlords are starting to offer incentives including free rent for several months or allowances for office fittings. Those incentives will become more commonplace here as landlords intensify marketing efforts to fill space.
And it's better to be at the head of the pack in offering incentives, than hold back and try to protect profit margins, McLernon said. Sooner or later, landlords will have to follow the trend and in the meantime will have lost time and clients, he said.
Pressure for incentives could increase rapidly in the coming months as vacancy rates are set to increase several fold, according to sector surveys. Colliers forecast modern office vacancy rates to reach 15% this fall.
GTC denies rumors
Developer Globe Trade Center (GTC) denied rumors that it was a mystery backer behind the recent purchase of Sadyba Best Mall shopping mall development in Warsaw.
Sadyba Best Mall, which is in the early stage of development, was sold earlier this year by Norwegian developer Pol Nordic Group to the Netherlands-based Reynolds Extrusion, a company new to the Warsaw real estate market. Some property watchers here have speculated that Reynolds is simply representing GTC's interest in the Sadyba purchase.
"I am not aware of that," said Zygmunt Chyla, marketing director of GTC, which last month broke ground on development of the Galeria Mokotow shopping mall. But Chyla did say GTC's shareholders, which include Netherlands-based Nobelgo, Bankers Trust and Citibank, could theoretically be involved in the Sadyba purchase. In addition to Galeria Mokotow, GTC has been developing the Mokotow Business Park office complex as well as a couple of residential properties.
Pol Nordic Group, which started the development of the $35 million Sadyba Best Mall five kilometers from GTC's Galeria last summer, earlier said it had to sell the development to fund other projects in Poland. (See Lokale Immobilia, May 4)
Sadyba Best Mall planned to have 40,000 square meters of retail space including a multiplex cinema scheduled for completion by year-end. But construction halted last summer and has not resumed.
Pawel Gralinski, president of Arch Magic architectural and investment firm, represents Reynolds in Poland. He said he knew nothing about GTC's possible involvement in Sadyba and declined comment on the project's development.
In brief
Andrew Gutowski, former president of Genesis Hotels Poland, returned to the United States last month. Gutowski left Genesis Hotels in February after the company scrapped plans to develop a chain of Woodfin Suite extended-stay hotels for owner U.S.-based hotelier Sam Hardage. Hardage pulled out of the project following the loss of its financial backer Nomura.
Some forecast prices for residential properties in Warsaw will fall. The reasoning: Increased supply will put downward pressure on prices. But that assumes supply outpaces demand. And demand, the other side counters, is about to be unleashed by the fledgling mortgage market, which could force prices even higher.
To support the falling price hypothesis, Maciej Nowotny, consultant with Relocations Services Poland, noted that the prices of new apartments have already stopped growing. And that is a positive direction for the market, said Nowotny, who expects prices to fall 5-7% annually over the next couple of years.
"There is no reason for market (prices) to go down," countered Peter Choynowski, chairman of Prime Property. "If the mortgage is available, everyone will try to leave those horrible Russian blocks."
Mortgages would keep prices going up, or at the least, would stabilize prices at the current level, he said.
Recent history supports the price rise argument. Since the early 1990s, residential prices in Warsaw have steadily climbed. The current per square meter sale price for downtown apartments runs zl. 4,000, more than double in nominal zloty terms from about zl. 1,800 in 1995, or up about 40% in dollar terms, according to figures obtained from Unikat real estate agency and dollar exchange rates. (See Lokale Immobilia, March 8)
Nowotny said that until this year there was no sign that prices could stop rising. "Everyone looked for an end to this spiral and some thought there is no end," he continued.
But the upward spiral is gone, he said. Owners who maintain high prices simply cannot sell their apartments.
Last year more than 6,000 apartments were completed in Warsaw, nearly 50% more than in 1997, according to the Warsaw Statistical Office. Unikat predicts that the number of apartment completions will reach 10,000 annually by the end of next year. About 100 residential projects, ranging from a few to several hundred dwellings, are now under construction, Nowotny said.
But Prime Property's Choynowski downplayed a sudden glut of new residences. It will take a long time before supply hits the market, he said. "There is intention to build. But you have to wait and see."
Renters market
Falling office rents in Warsaw could prompt landlords to start offering incentives to attract tenants. But even strong marketing campaigns won't save some developments from bankruptcy, according to Colliers International's global chief, who last week visited Poland as part of his Central European tour.
"I don't think it's the end of the world," said John McLernon, Vancouver-based chairman of Colliers International. The days of five-year returns on investment, or 20% return rates, are gone for good, he said. The flip side is it may be a sign of maturity.
In developed markets such as Canada, rates of return run 5-6%. The Polish real estate market will go in the same direction, which also means some buildings would default on loans, in other words, go bankrupt, McLernon said. "It's more of a standard market," he said. "It's going to be good for tenants."
Already, landlords are starting to offer incentives including free rent for several months or allowances for office fittings. Those incentives will become more commonplace here as landlords intensify marketing efforts to fill space.
And it's better to be at the head of the pack in offering incentives, than hold back and try to protect profit margins, McLernon said. Sooner or later, landlords will have to follow the trend and in the meantime will have lost time and clients, he said.
Pressure for incentives could increase rapidly in the coming months as vacancy rates are set to increase several fold, according to sector surveys. Colliers forecast modern office vacancy rates to reach 15% this fall.
GTC denies rumors
Developer Globe Trade Center (GTC) denied rumors that it was a mystery backer behind the recent purchase of Sadyba Best Mall shopping mall development in Warsaw.
Sadyba Best Mall, which is in the early stage of development, was sold earlier this year by Norwegian developer Pol Nordic Group to the Netherlands-based Reynolds Extrusion, a company new to the Warsaw real estate market. Some property watchers here have speculated that Reynolds is simply representing GTC's interest in the Sadyba purchase.
"I am not aware of that," said Zygmunt Chyla, marketing director of GTC, which last month broke ground on development of the Galeria Mokotow shopping mall. But Chyla did say GTC's shareholders, which include Netherlands-based Nobelgo, Bankers Trust and Citibank, could theoretically be involved in the Sadyba purchase. In addition to Galeria Mokotow, GTC has been developing the Mokotow Business Park office complex as well as a couple of residential properties.
Pol Nordic Group, which started the development of the $35 million Sadyba Best Mall five kilometers from GTC's Galeria last summer, earlier said it had to sell the development to fund other projects in Poland. (See Lokale Immobilia, May 4)
Sadyba Best Mall planned to have 40,000 square meters of retail space including a multiplex cinema scheduled for completion by year-end. But construction halted last summer and has not resumed.
Pawel Gralinski, president of Arch Magic architectural and investment firm, represents Reynolds in Poland. He said he knew nothing about GTC's possible involvement in Sadyba and declined comment on the project's development.
In brief
Andrew Gutowski, former president of Genesis Hotels Poland, returned to the United States last month. Gutowski left Genesis Hotels in February after the company scrapped plans to develop a chain of Woodfin Suite extended-stay hotels for owner U.S.-based hotelier Sam Hardage. Hardage pulled out of the project following the loss of its financial backer Nomura.
