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The Warsaw Voice » Real Estate » May 20, 2009
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Why £ód¼ Is Drawing Them In
May 20, 2009   
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£ód¼'s excellent location in central Poland, right next to the future junction of the A1 and A2 freeways, acts as a magnet for warehouse developers and business process outsourcing (BPO) companies.

The supply of modern office space in £ód¼ in 2008 was 40,500 sq m, a record figure for the city, according to data by DTZ Research company. Apart from newly built facilities, this also included renovated tenement houses and former industrial buildings.

Most of the modern office buildings are located in the city center, in the vicinity of Pi³sudskiego Ave. and Piotrkowska St. They include Orion (9,600 sq m) and the £ód¼ Business Center (7,400 sq m) built by Echo Investment, Red Tower (10,500 sq m), and the European Service Center (8,000 sq m) built by Philips Polska.

According to DTZ, 2009 will see a record number of new office premises in £ód¼, which could result in excessive supply. A total of 102,600 sq m could hit the market, and even if completion of some of these facilities is halted or delayed, supply in 2009 is expected to be no less than 72,000 sq m. According to CB Richard Ellis, rents currently stand at 14-16 euros per sq m of modern office space.

The largest office project currently under construction is the University Business Park, being developed by Globe Trade Centre. This modern business park is rising in the very center of £ód¼, near the Technical University of £ód¼, close to the intersection of Ko¶ciuszki and Mickiewicza avenues. The building will have about 36,800 sq m of A-class office space. The complex will include two seven-story buildings. The first one was originally scheduled to be completed late this year, but due to worsening economic trends in recent months, the pace of work is being adapted to progress in leasing space. The shell stage of both buildings is expected to be finished over the next two months.

Developer Echo Investment planned to complete the Aurus building in the district of Widzew on Pi³sudskiego Ave. in the last quarter of 2009. But there is every indication that the project will be completed in stages, depending on what happens on the lease market. The space for rent in this A-class building will total 28,000 sq m.

This month will see the opening of a new A-class office building, Forum 76, at the intersection of Pi³sudskiego Ave. and Kopcińskiego St. The building has seven stories with a total space of 12,000 sq m. Tenants include Deloitte, Bank Zachodni, WBK, and Bank Millennium. Virako is the project's developer.

In the second quarter of this year, Mermaid Properties plans to complete Cross Point £ód¼, a project based on redeveloping and expanding the former Adam Próchnik Clothing Factory. The building will offer 12,500 sq m of A-class office space on nine stories. The project is located on one of £ód¼'s main thoroughfares, ¦mig³ego-Rydza Ave., where it intersects with Milionowa St., on the £ód¼ section of the Gdańsk-Katowice route. This office building includes 175 parking spaces above and under ground, while the utility basement houses a fitness center and a restaurant.

"We classify most office space in £ód¼ as modern," says Bartosz Mierzwiak, associate director at Jones Lang LaSalle. "These are premises converted from former factory buildings. The upside of this is the substantial height of the offices and good load-bearing capacity of the floors. There are more downsides, though, as these buildings were not originally designed as offices. They are usually very deep and therefore poorly lit premises, and most often have a dense network of supports that make interior design difficult. In a time of crisis, everyone is careful with their money, choosing attractive but not too expensive premises. That's why, at first glance, rents in modern office buildings might be too high for £ód¼ companies. They should find takers among BPO companies, though, because such businesses have certain corporate requirements, like adequate power supply and ventilation and air-conditioning system efficiency. Polish companies with nationwide operations, like banks or insurance companies, also rent new buildings as their offices. The city's most prosperous companies make up the third group that wants to have offices in a modern building for reasons of prestige. It's worth remembering that a modern, theoretically more expensive, building can in fact turn out to be cheaper if we consider the greater employee density that is possible thanks to a reduced number of supports, better lighting and more efficient systems-of course without any loss of work comfort. Then there is the ease of rearranging the space thanks to the raised floors plus the certainty of uninterrupted operations thanks to properly safeguarded power supply."

Freeways driving the market
The £ód¼ region accounts for 22 percent of the national rental market, or for almost 30 percent if Warsaw is excluded, according to Colliers International real estate services company. This should come as no surprise, experts say, because £ód¼ has an excellent location near the planned junction of the A1 and A2 freeways.

The £ód¼ region, which includes £ód¼, Stryków and Piotrków Trybunalski, has attracted investment from the largest warehouse developers such as Panattoni, ProLogis, Segro and AIG/Lincoln.

Tulipan Park £ód¼, located in the industrial district of Widzew in the eastern part of the city and built by UK-based Segro, one of Europe's leading developers, began operations in November 2008. This project is a modern logistics center with a total area of 30,000 sq m and 3,000 sq m of warehouse and office space in a separate "small business units" section.

In March this year, ProLogis completed work on two projects: ProLogis Park Rawa (21,000 sq m) and ProLogis Park Piotrków II (17,160 sq m).

The supply of modern warehouse space in central Poland totals 844,100 sq m, of which 128,200 sq m is vacant. Rents range from 2.80 to 3.60 euros per sq m per month, according to data by Colliers International.

Retail trade in bloom
At the end of the third quarter of last year, saturation with modern retail space in the £ód¼ conurbation reached 392 sq m per 1,000 residents, giving the area fifth place among the biggest conurbations. The same index for the city of £ód¼ alone was 476 sq m, ranking the city third nationwide, according to data by Jones Lang LaSalle.

There are 12 shopping centers in the £ód¼ conurbation, but only five are classified as modern facilities. The largest are Manufaktura (110,000 sq m) and Galeria £ódzka (45,000 sq m).

Next spring the £ód¼ market for commercial real estate will include Ikea Port £ód¼ with 100,000 of space. The Ikea store, whose opening is planned before the end of this year, will occupy 33,000 sq m. The center, located in the suburbs on Pabianicka St., will house about 200 retail outlets, including a Leroy Merlin home improvement store, an Alma delicatessen as well as Douglas, Kakadu, Cartoon Planet, Rossmann, Vision Express, Galeria Prezentów and ¦wiat Ksi±æki stores.

Port £ód¼ will offer a parking lot above the ground and an underground garage with a total of 4,500 free parking spaces. The central part of the center will be a recreation/retail zone of 10,000 sq m with a play area, a music stage, and a garden area with trees.

"£ód¼ is a very unusual city," says Magdalena Fr±tczak, retail director at CB Richard Ellis Polska. "It was one of the most vibrant industrial centers before 1990 but later lost its position among Poland's largest regional cities. Today, despite high unemployment and low wages, the city manages to take advantage of its central location in the country. The retail space market here shows very stable demand. The vacancy rate is very low and applies only to older commercial real estate. Most Polish and foreign retail chains have a presence in £ód¼'s shopping centers. They generate high sales here, which encourages them to plan new stores," Fr±tczak adds.

Plenty to choose from
According to the latest data from Ober Haus real estate agents, prices on the £ód¼ market have stopped dropping while demand remains satisfactory compared with the start of the year. This does not change the fact, however, that the huge supply of newly built apartments substantially exceeds the demand. Clients set on buying their own home have plenty to choose from, experts say.

In the first quarter of this year, a new residential building was delivered to the market: 8/10 Bema St. The investor is Abart Development, a company that has been building housing for 14 years. This latest project includes apartments ranging from 72 to 145 sq m in area and 2.95 m high. Each unit has at least two balconies. Apartments larger than 96 sq m are additionally fitted with a system that allows a fireplace to be installed. Two fast elevators and two stairwells ensure access from the underground parking garage to the residential floors. An entrance hall of over 100 sq m with a reception desk leads into the building. The price of the apartments is zl.11,000 to zl.13,500 per sq m. Seven of the initial pool of 18 apartments are still available, all of them bigger than 96 sq m.

Meanwhile, Abart Development is planning a new project: an apartment building at 16/18 Bema St. Construction is scheduled to begin in the third quarter of this year and end in the first quarter of 2011. The building will include 16 apartments from 75 to 400 sq m in area and 2.9 m high. Prices will start from zl.9,000 per sq m.

At the end of this year, Polnord-£ód¼ II plans to complete the first of five buildings on the City Park residential estate, at 41/43 Æeligowskiego St. in the center of £ód¼. Ultimately, this development will comprise 464 apartments with a total area of about 30,000 sq m. The complex includes five buildings from six to 15 stories high, forming a closed estate with a green courtyard in the middle and a two-level underground garage. The estate will also have 1,770 sq m of commercial space, to be occupied by outlets such as a delicatessen, restaurant, fitness club, bank, beauty and medical service center, and laundry. The first building to be completed will have 56 apartments with balconies, loggias or terraces, on five stories. The apartments on four identical stories range from 26 to 95 sq m, while the top floor will be home to luxury apartments from 122 to 154 sq m.

At 27 Karolewska St., Warsaw-based developer Hirny BD SA is building an estate of four six-story buildings. The project is worth a total of zl.81 million. The Aqua Park, the Botanical Garden and the zoo are close by. The estate will offer 236 apartments ranging from 48.5 to 112.1 sq m. There will be an underground parking garage under the buildings, and space for playgrounds and common green areas are planned as well. Apartment prices start from zl.3,800 per sq m. Completion is planned for this summer.

Magdalena Fabijańczuk


£ód¼ is a provincial capital in central Poland, about 130 km from Warsaw. It is a major academic center, with six state-run universities and 20 private ones. The W³adys³aw Reymont £ód¼ International Airport is just 6 km from the city center.

According to the Central Statistical Office (GUS), £ód¼ is Poland's third-largest city in terms of population (750,125) and fourth-largest in terms of area (293.25 sq km).

£ód¼ is a railway junction for rail lines leading from Warsaw and Koluszki, Toruń and Kutno, Poznań and Ostrów Wielkopolski, and a hub for national highways from Gdańsk and Toruń, Konin, Wroc³aw, Piotrków Trybunalski and Czźstochowa, and Warsaw. Soon two trans-European freeways, the A1 and A2, will intersect about 10 km from the city.
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