We present the latest report from Colliers International, dedicated to the Polish office space market. The previous issue of “Logistyka” (6/2005) featured a report by this company on Class A warehouse space in our country.
The office real estate market outside of Warsaw is enjoying increasing interest from investors. High demand for modern office space in local markets is encouraging developers to carry out further investments. The most dynamically developing cities are Krakow and Wroclaw, where the amount of office space to be commissioned over the next two years is estimated at 70,000 and 90,000 sqm, respectively. Lodz continues to be the slowest-developing office market.
Investment market
A stable economic situation and optimistic forecasts for the future are attracting further institutional investors to the Polish commercial real estate market, who are looking to diversify their portfolios. The value of investments in office buildings during the first three quarters of 2005 amounted to over 0.6 billion euros for Warsaw buildings alone, and another 0.3 billion euros was likely spent by the end of last year. Approximately 64 million euros were invested in offices outside Warsaw –
in Gdynia, Krakow, and Wroclaw. The most active investors in the office market included: Arka BZ WBK (Alfa Plaza BC, Quattro Forum, Green Park), Aviva Central European Property Fund (Irydion, Wisniowy Business Park A, and the Prokom company headquarters), as well as Commerz Leasing (Rondo 1).
Along with the boom in the office market, a large number of investments in retail and warehouse facilities were also recorded. By the end of September 2005, Colliers International tracked 12 various transactions in the retail space market, with an estimated value of almost 0.6 billion euros. Companies such as Arka BZ WBK, Meinl European Land Ltd., Capital Partners, Kleppierre, Dawnay Day Carpathian, and White Estate Investments have made investments in shopping centers in Poland.
The cited figures could be significantly higher if not for the limited availability of high-class investment products. Investment funds wishing to increase their share in the Polish market are primarily looking for well-designed and well-leased properties that will provide them with a steady income. However, there were not many buildings during this period that met the conditions set by investors. Nevertheless, property owners are more willing to sell properties due to the rapid yield compression observed in recent years. This is one of the reasons for the steady growth of investments in Poland. So-called “sale and lease-back” transactions are becoming increasingly common. Building owners often decide to sell and then lease them back long-term from the new owner. These types of contracts have become popular, not only in the office sector. Yields on office investments are now at the 7% level. The situation is similar in the retail sector. As for warehouse facilities, yields obtained from this type of investment range from 8% to 9%. Companies and various types of funds interested in the Polish real estate market come mainly from Great Britain, Ireland, Austria, Germany, the Netherlands, Luxembourg, the United States, as well as from Poland.
The article comes from the magazine “Logistyka”, no. 1/2006.