Unikat sees new business opportunity from bureaucrats
Contrary to popular thinking, a burgeoning bureaucracy is underway that has the property market eyeing potential growth from a new client base.
Administrative reforms in local and regional governments as well as at the ministerial level have government agencies hunting for office space, according to Unikat real estate agency, which just brokered a deal for an unspecified agency to buy 4,500 square meters in a renovated, three-story office on ulica Dominikanska in Warsaw's Mokotow district.
"There are lots of new (state) offices," said Leszek Gietko, head of the office agency with Unikat.
Gietko would not reveal the terms of the deal or identify the institution before it moves to the building at the end of the first quarter.
The deal was Unikat's second involving a state institution over the last few months. Last year the agency brokered a lease agreement between the Warsaw Circuit Court and the landlord of a building on ulica Barska in the Ochota district. The court will take 5,000 square meters of office space.
"Public institutions are coming into the market," Gietko said.
These institutions have traditionally housed themselves in state-owned buildings. No longer. Due to a shortage of space in publicly owned buildings and the growth in administrative agencies, a new client base is moving into the private real estate sector.
And this is only the beginning, Gietko said.
"European Union procedures will stimulate the creation of new administrative entities," he said.
Doing business with public institutions has its advantages, Gietko said. "They are usually good clients because they look for large amounts of space," he said. Additionally, public offices, compared to many commercial firms, are more predictable as the number of personnel and thus amount of office space needed doesn't fluctuate with the market situation, Gietko added. "It (the government) is a more secure payer than commercial companies," he said.
On the downside, however, public institutions are slow to make a decision, he said.
Roma gets first tenant
Pension fund PTE Skarbiec Emerytura has signed a deal to lease 1,500 square meters of office space in the Roma Office Center building on ulica Nowogrodzka in Warsaw, according to Healey & Baker, which is representing the owners.
Skarbiec, which signed a five-year lease agreement, is the first office tenant in the Roma center, which was developed by a joint venture of the Warsaw Archdiocese and local firm ABC Holding.
Skarbiec will take the sixth floor of Roma, about 15% of the structure's 10,365 square meters of total rentable office space. Roma will also have 1,340 square meters on the ground floor for retail operations. The Tokio restaurant's owners are also expected to take space on the groundfloor, where they will develop a fast-food style sushi bar.
Although Skarbiec's price tag for space in Roma was not revealed, the asking rent for the building is $35 per square meter a month, excluding service charges, said Ricky Aboo, head of the office agency at Healey & Baker.
That rate puts Roma within the price range of other modern office buildings in the city center, including the Warsaw Financial Center and Warsaw Towers, Aboo said.
Roma's strong points include a good location, 100 meters from the Marriott Hotel, as well as its high-quality standards including raised floors and seven elevators, Aboo said.
Roma was initially planned as a build-to-suit site for one tenant scheduled to open in December, Aboo said. The developers had planned to lease the entire building to one of the former Big Six accounting firms Coopers & Lybrand, but those plans vanished when the firm merged with Price Waterhouse.
The delay in the opening date, pushed back to March, was attributed to weather, said Aboo of Healey & Baker. "It's just a minor slip up," he said. "It's a normal thing."
Office demand to recover
Demand for office space this year will recover from lows in 1999, but it won't reach the record highs of 1998, according to estimates released by Henry Butcher real estate agency.
The forecast demand for office space will reach 250,000 square meters, 25% more than in 1999 when the take up was 200,000 square meters, said Brian Burgess, Henry Butcher's country manager for Poland.
But take up this year will still be much lower than in 1998 when it climbed as high as 300,000 square meters, Burgess said. "It (1998) was an unusual year," he said. Take up of office space in 1998 was so high because many banks including the nation's largest retail bank, Polska Kasa Oszczednosci Bank Panstwowy (PKO BP), bought their office space.
Demand for office space this year will come mainly from companies expanding their presence here as opposed to those just arriving, Burgess said.
Demand for office space is also shifting from downtown to the suburbs, Burgess said. This year, half the take up will go to the suburbs, he said. Previously, the city center grabbed the lion's share, accounting for up to 60% of the annual take up, Burgess said.
Overall, about 1 million square meters of quality, new office space has come onto the market during the past decade, Henry Butcher agency said. Construction boomed in the last three years, accounting for about 75% of new office space with 270,000 square meters coming on line last year.
About 120,000 square meters of last year's new office space went vacant, with about 80% located downtown, according to Henry Butcher.
The flood of new office space saw rents drop 25% in many cases, according to property watchers. Henry Butcher noted that the slow uptake of space led to a 12% vacancy by the end of 1999, up from 7% at the beginning of the year. With the new supply this year forecast at 250,000 square meters and demand set to increase, Henry Butcher projects a drop in the overall vacancy rate and firming in rental rates.
