Warsaw most expensive, but cities catch up
"We have certainly seen a trend for land prices going up," said Janet Choynowski, chief executive officer at Prime Property in association with CB. Richard Ellis-Hillier Parker, referring to areas outside of Warsaw. The price climb in outlying cities is due to expanded development in the retail sector, she added. (See related story, page S1.)
Another reason is that much land in cities outside Warsaw is not suitable for development due to infrastructure constraints. So useable property is being sold at a premium, Choynowski said.
Krakow is a prime example of how prices have risen in the retail sector during the past few years.
"There is not enough free land in Krakow," said Artur Staniszewski, a real estate consultant with Henry Butcher Poland in association with Gerald Eve International. Retail rents on Krakow's prestigious ulica Florianska range from $70-$80 per square meter. But the rent drops to $30-$50 per square meter in other parts of the city.
Purchasing retail land in Krakow can also be a costly affair. "If you want to buy land in a good location ... it is at least $100 per square meter," said Staniszewski. He added that one retail site in Krakow's center is going for $400 per square meter.
And prices in regional cities are not likely to stabilize any time soon, real estate players said. "I think we are at the beginning," Staniszewski said.
Foreign investment is one cause behind Krakow's high rents: In the past three or four years, said Staniszewski, investment into the Krakow region totaled $600 million. And another $700 million is expected within the next three years.
A square meter of class-A office space at the 12,000 meter Cracovia Business Center costs about $30, said Staniszewski, adding that in comparison Warsaw is $40-$45 per square meter.
Krakow's class-B offices are $15-$20. According to a November 1998 property report released by Knight Frank Nieruchomosci, Warsaw's class-B office space costs $25-$30 per square meter to rent.
The Knight Frank study reported that there were currently four projects under construction in Krakow that should add 38,000 square meters of office space by 2000 to the already-existing 520,000 square meters.
"Some foreign companies have decided to establish their companies here," Staniszewski said, citing British Petroleum as an example. "It is the second year that Krakow was very popular among foreign investors."
The situation differs somewhat for Katowice, a region with heavy industrial development. Because of both its proximity and historical connections to Germany, Katowice prices are quoted mostly in deutschemarks. But retail land prices remain quoted in U.S. dollars.
Rents on retail locations in downtown Katowice are approximately DM 100 per square meter. Outside the city center, rates drop by half to DM 40-DM 50.
But, as elsewhere, retail is the key word in Katowice. In 1997, German developer Metro purchased about 16 hectares of land for $86 per square meter in the town of Czeladz to build a hypermarket. The company is renting space in the market to tenants for DM 50 per square meter.
"There is a huge market for retail," said Marek Wachowski, a consultant to Henry Butcher based in Katowice. This is because the Upper Silesia region has a population of about 4 million.
But obtaining land in and around Katowice is particularly difficult, regardless of how developed this region's infrastructure is. "In general it has good infrastructure, but it is incredibly polluted," said Wachowski. This makes good land harder to find and this pushes prices up.
Wachowski also cited increased retail demand and foreign investment as putting upward pressure on prices.
The bulk of continued real estate development, and in turn increasing prices, is likely to be in the west and in particular in cities such as Poznan. "This is a very vibrant city attracting German investment," Wachowski said.
Eastern cities, on the other hand, have seen little development. It is likely that cities such as Bialystok and Terespol, which are relatively close to the Belarussian border, boast much lower prices. But there is little interest in these areas and in fact little price information among brokers.
"Those cities, from the economic point of view, are the worst parts of Poland," where unemployment is 20-30%, said Staniszewski. "As far as I know there are no serious foreign investments there."
Another reason is that much land in cities outside Warsaw is not suitable for development due to infrastructure constraints. So useable property is being sold at a premium, Choynowski said.
Krakow is a prime example of how prices have risen in the retail sector during the past few years.
"There is not enough free land in Krakow," said Artur Staniszewski, a real estate consultant with Henry Butcher Poland in association with Gerald Eve International. Retail rents on Krakow's prestigious ulica Florianska range from $70-$80 per square meter. But the rent drops to $30-$50 per square meter in other parts of the city.
Purchasing retail land in Krakow can also be a costly affair. "If you want to buy land in a good location ... it is at least $100 per square meter," said Staniszewski. He added that one retail site in Krakow's center is going for $400 per square meter.
And prices in regional cities are not likely to stabilize any time soon, real estate players said. "I think we are at the beginning," Staniszewski said.
Foreign investment is one cause behind Krakow's high rents: In the past three or four years, said Staniszewski, investment into the Krakow region totaled $600 million. And another $700 million is expected within the next three years.
A square meter of class-A office space at the 12,000 meter Cracovia Business Center costs about $30, said Staniszewski, adding that in comparison Warsaw is $40-$45 per square meter.
Krakow's class-B offices are $15-$20. According to a November 1998 property report released by Knight Frank Nieruchomosci, Warsaw's class-B office space costs $25-$30 per square meter to rent.
The Knight Frank study reported that there were currently four projects under construction in Krakow that should add 38,000 square meters of office space by 2000 to the already-existing 520,000 square meters.
"Some foreign companies have decided to establish their companies here," Staniszewski said, citing British Petroleum as an example. "It is the second year that Krakow was very popular among foreign investors."
The situation differs somewhat for Katowice, a region with heavy industrial development. Because of both its proximity and historical connections to Germany, Katowice prices are quoted mostly in deutschemarks. But retail land prices remain quoted in U.S. dollars.
Rents on retail locations in downtown Katowice are approximately DM 100 per square meter. Outside the city center, rates drop by half to DM 40-DM 50.
But, as elsewhere, retail is the key word in Katowice. In 1997, German developer Metro purchased about 16 hectares of land for $86 per square meter in the town of Czeladz to build a hypermarket. The company is renting space in the market to tenants for DM 50 per square meter.
"There is a huge market for retail," said Marek Wachowski, a consultant to Henry Butcher based in Katowice. This is because the Upper Silesia region has a population of about 4 million.
But obtaining land in and around Katowice is particularly difficult, regardless of how developed this region's infrastructure is. "In general it has good infrastructure, but it is incredibly polluted," said Wachowski. This makes good land harder to find and this pushes prices up.
Wachowski also cited increased retail demand and foreign investment as putting upward pressure on prices.
The bulk of continued real estate development, and in turn increasing prices, is likely to be in the west and in particular in cities such as Poznan. "This is a very vibrant city attracting German investment," Wachowski said.
Eastern cities, on the other hand, have seen little development. It is likely that cities such as Bialystok and Terespol, which are relatively close to the Belarussian border, boast much lower prices. But there is little interest in these areas and in fact little price information among brokers.
"Those cities, from the economic point of view, are the worst parts of Poland," where unemployment is 20-30%, said Staniszewski. "As far as I know there are no serious foreign investments there."
