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Summary of 2011 and Projections for 2012
February 23, 2012   
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Dominika Jędrak, Research and Consultancy Director at Colliers International:

General information
Last year was a good time for the Polish commercial property market. The supply of office, retail and distribution space increased, although not all markets posted significant gains. Leasing activity remained at a high level, with some regional markets registering record transaction volumes. Prospects for 2012 are optimistic for now, in terms of both new stock supply and leasing activity, which should stay at a stable level. Of course, the uncertain economic situation may result in developers and tenants being more cautious about new schemes.

Office market
Changes to the total office stock in Poland in 2011 were slight. The amount of new stock coming onto the market in the full year was 36 percent smaller than in 2010. In turn, leasing activity increased in both Warsaw and regional cities, with the volume of transactions rising year on year by about 4.5 percent in Warsaw and by as much as 27 percent in regional cities. As in 2010, leasing activity on regional markets was the highest in the southern city of Cracow, but it also grew markedly in other cities—Poznań in the mid-west, Katowice in the south and the coastal tri-city of Gdańsk, Gdynia and Sopot.

The vacancy rates in Warsaw and on most regional markets showed a downward trend, with the largest drops recorded in Katowice and the tri-city – respectively from 22 percent to 13.7 percent and from 16.8 percent to 10.8 percent. Rents only increased, by about 5 percent, in Warsaw’s Central Business Area. Outside the city center, changes were slight as was the case with regional markets.

It seems that 2012 will be quite good for the office market. It is projected that in the first half of the year leasing activity will remain at a level similar to that noted in the fourth quarter of 2011. Also expected is a sharp rise in the supply of modern office stock in 2012. It is estimated that supply will be more than two times higher than in 2011.

Retail market
In terms of development activity, one may regard 2011 as an optimistic year, with nearly 625,000 sq m of modern retail space supplied onto the market throughout Poland. This represented a 27-percent increase on 2010. Most of the development activity—52 percent of the new stock—took place in small and medium-sized cities. There was also high activity in such regional cities as Radom, Toruń and Kielce. Also noticeable was higher leasing activity, both in large cities and in small and medium-sized ones. Almost 40 new retail chains appeared on the market, including the Scandinavian do-it-yourself chain Jula, the U.S. fashion chain GAP and the Toys “R” Us toy retailer, and the British fashion chain Dorothy Perkins. Most of the chains opened their first stores in Warsaw or its vicinity as well as in Poznań and ŁódĽ.

The vacancy rates in the eight largest cities were at a low level of less than 3 percent. Rents for retail space remained at a stable level, as the supply of new stock was relatively high.

The Polish retail market is still considered to be attractive and not yet saturated, both in terms of the amount of retail stock and the number of retail chains present in the country. This is reflected in the interest of many international retail chains in entering the Polish market. Additionally, 550,000 sq m of retail space is scheduled to be supplied onto the market in 2012. In connection with this, the situation on the retail market is likely to remain stable.

Distribution market
2011 was an exceptionally good year for the distribution market, with supply growing by about 40 percent compared with 2010. Upper Silesia saw the largest amount of new stock coming onto the market. Leasing activity remained at a high level. Overall take-up in the full year totaled 1.8 million sq m, of which more than 40 percent was leased in Warsaw and the surrounding areas. In terms of transaction volume, 2011 was a record year for Cracow and Gdańsk, where take-up totaled 54,000 sq m and 55,500 sq m respectively. Demand on the two markets was the highest on record. It is also worth noting that pre-lets accounted for 61 percent of all transactions in Cracow and almost 90 percent in Gdańsk.

The vacancy rate fell on most markets compared with 2010 and stood at less than 11.4 percent at the end of 2011. The largest drop was in the northwestern city of Szczecin. Rents stayed at a generally stable level. In regions where demand was high and the vacancy rate the lowest, rents showed a slight upward trend.

In 2012, the supply of new stock will be at a level similar to that recorded in 2011. It is estimated that demand will be relatively stable. It should be noted that 74 percent of the space scheduled for completion in 2012 has already been leased. As a result, drops in the vacancy rate can be expected. We also expect a rise in the number of speculative projects.
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