Top agents depart Healey & Baker to create King Sturge Polish office
In its bid to open a Warsaw office in January 2000, King Sturge, the U.K.-based real estate consulting firm has lured three top executives from Healey & Baker's local office.
King Sturge hired Chris Grzesik, a Healey & Baker partner, as well as Roman Fortuna, who was managing its warehousing agency, and Maja Biesiekierska, who was dealing with facilities management, said Paul Betts, managing director of King Sturge's Czech office.
'We are currently in the process of finding offices," Betts said of King Sturge's expansion into Poland, which will be the company's second Central European market. Since 1993, the company has had an office in Prague called King & Co, which will be renamed King Sturge in March 2000, Betts said. The Polish office, once it is officially created, will also be named King Sturge. The company will focus on office and warehousing work as well as valuation and investment consulting, Betts said.
King Sturge plans to bring a U.K.-based agent here in February and wants to hire two additional staff early next year for a six-person office, Betts said.
Under pressure
Difficulties in obtaining financing for new office developments have some developers looking to sell existing buildings so they can start new projects, Henry Butcher Poland said in a recent report on the real estate investment market here.
As the supply of office space increases in Warsaw and vacancy rates also rise, banks are not as eager to finance new projects, and developers will have to seek other funds, said Brian Burgess, Henry Butcher Poland's country manager. "They want to take their profit out to reinvest it."
This trend is forcing landlords to be more flexible in negotiations with potential institutional investors, Burgess said.
One example that property insiders cite is the recent decision by the Sienna Center to lower its asking price for the building to $65 million from an original price of $70 million.
Until now, there have only been a few sales by developers to institutional investors, including the sales of the Atrium building to Pricoa and the Wisniowy Business Park phase A to Commercial Union.
Throughout the city there are four buildings being marketed by developers with a combined sales tag of about $185 million, Burgess said. The buildings are Saski Point, the Sienna Center, the Optimus building and Wisniowy Business Park phase C and D, he added.
While more developers are looking to sell, yields are still pretty stable with the average Warsaw investment yield at about 13%, Burgess said. Yield is an indicator of annual revenue for an investor. The more attractive a building is, the lower the yield as it is seen as a more secure investment.
In the case of highly desirable projects, such as Saski Point and Wisniowy, yields can be as low as 11%, Burgess said. Weaker projects are likely to have higher yields.
"Sienna is a weaker product," Burgess said, because at 30,000 square meters it is a large building and rents are higher than market rates, which increases the risk that they will fall.
Late, but signed
The opening of the Europlex office building on ulica Pulawska is months behind schedule, but at least the project has landed a big tenant.
German insurer Allianz has signed a deal to lease approximately 9,000 square meters in the Europlex, according to Jones Lang LaSalle, the agent for the building. The contract is the largest office deal in Poland signed in 1999, beating the 6,000 square-meter lease signed earlier this year by publisher Infor for space in the Klif building on ulica Okopowa in Warsaw.
The Allianz deal is also the second-largest contract signed by Jones Lang LaSalle in Poland after a 10,000 square-meter lease by Ericsson for a building on ulica Kasprzaka, which was then renamed Ericsson Plaza.
Allianz will fill almost 70% of Europlex's office space, when it opens. The building, which will also house a multiplex cinema and restaurants, was due to open in October. But delays have pushed that back to February 2000.
The Europlex still has about 4,000 square meters of free office space. The space has an asking price of $29 per square meter, according to a statement from Hanspeter Hoesli, a board member of Europlex's developer, Kinomax, which is owned by Polish and Austrian investors.
Housing report
Construction spending on the residential sector reached zl. 6.2 billion ($1.55 billion) in the first half of 1999, according to figures released in December by the government's Office of Housing and Urban Institute.
But while there were 27,400 residences developed nationwide in the first six months of the year, this was 10% less than in the same period of 1998, the office said in a report on housing construction.
The drop results from the continued underdevelopment of the mortgage market and an overall economic slowdown after the 1998 Russian crisis, property industry members said. "The (residential) demand is still created by consumers, who buy for cash and that's why they are very exposed to economic prosperity," said Maciej Nowotny, who runs Poland Relocation Services.
Cities have attracted the vast majority (77%) of new housing construction with the remainder in rural areas, the housing office said.
Housing development in the first half was mostly in multi-family units, which accounted for 60% of all residences developed at the time. The average size of an apartment built during this period was 60 square meters, the office said, while the average size of a new house was twice as large at 132 square meters.
The average price per square meter for a newly developed apartment was zl. 1,880. There is a wide disparity, though, between prices in small and large cities. Per-square-meter prices in small cities run zl. 1,000-zl. 1,600 per square meter while in Warsaw, Krakow and Poznan the average is closer to zl. 3,000, the office said.
