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The Warsaw Voice » Real Estate » August 29, 2012
The Real Estate Voice
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Demand for Modern Offices on the Rise
August 29, 2012   
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The Polish office property market is booming, with 1 million square meters of new office space under construction nationwide.

Around 900,000 sq m of new office space came onstream last year. Statistics for 2012 show that, in the nine fastest-growing cities in Poland, the office property market is doing well, with demand still at a relatively high level. In the first quarter of this year, 225,000 sq m of new space was constructed. The growing demand for offices is accompanied by economic growth, strong exports, a continually high level of consumption in Poland, and expansion of transport infrastructure.

Andrzej Brochocki, managing partner at the Brochocki law firm, says there is a growing interest in Polish office space among international corporations. They have come to appreciate the Polish commercial property market, especially as an outsourcing location, Brochocki says. Some 1 million sq m of world-class office space is now under construction in Poland. In Warsaw alone, work to build over 300,000 sq m is expected to be completed by the end of the year. The strongest demand is for small offices, which are still in short supply in the largest cities.

Data for the first two quarters of the year show that in 2012 as a whole, the value of deals in the office sector will probably reach a level comparable with that in the previous year or may even exceed this level. 2012 is an exceptional year, experts say, because Poland hosted the European soccer tournament in June together with Ukraine. The infrastructure constructed in the run-up to the tournament gave a boost to many redevelopment projects, which have increased the value and attractiveness of individual locations.

“We are happy to see Poland ranked first among Central and Eastern European countries in [Jones Lang LaSalle’s] 2012 Global Real Estate Transparency Index,” Brochocki says. “This means that the Polish market looks stable compared with other European countries. In Europe, only Poland and Germany have seen steady growth in demand for office space. An improvement in the legal environment, more transparent rules, lower investment risk, and slow but steady growth in rents are the main factors behind Poland’s high and rising position in various business league tables.”

The largest amount of office space is appearing on the Warsaw market. Demand for modern office space is still high in the city, according to a report on the Warsaw office property market in the first half of 2012 by real estate services company CBRE. In the first half of the year, lease agreements were signed for 298,000 sq m, slightly less than a year earlier, CBRE says. Warsaw had 3.7 million sq m of modern office stock at mid-year, with 33 percent of the total space in the center of the city. The largest office project completed in this period was the second stage of the Poleczki Business Park, which delivered 21,000 sq m of new space to the market. Other important office projects completed in the second quarter of 2012 included Platinium Business Park V and Ufficio Primo.

“Tenants are paying more attention to rents because the zloty is weaker against the euro and there is a growing supply of new office space under construction,” says Joanna Mroczek, director for market research and consultancy at CBRE in Poland. “This is why a further increase in rents can only be expected in the central business area, where supply is still limited.” The amount of office space under construction is growing because more pre-let agreements are being signed.
A total of 700,000 sq m of new office space is under construction in Warsaw, 20 percent of the existing stock. The eight largest projects account for over 50 percent of all new space under construction. In the long run, the growing supply of new office space may drive rents down.

The largest deals in the first half of 2012 included a pre-let agreement for 27,000 sq m at T-Mobile Office Park signed by the PTC company, a pre-let agreement for 12,100 sq m at Plac Unii signed by ING Group, and a renewed lease agreement for 9,100 sq m at Trinity Park I by Axel Springer.

The Senator office building developed by Ghelamco on Bielańska Street in Warsaw is an example proving that it does not take long to enlist tenants for top-quality office premises in attractive locations. The project, which was carried out in consultation with the heritage conservation authorities because of its location in a historic neighborhood in the city, delivered 25,000 sq m of modern office space. The building has enjoyed much interest among prospective tenants since the beginning of the project; 75 percent of the total space has already been rented out to large Polish and international companies. The largest tenant is PKN Orlen, which moved into the building in early July. Other tenants—including companies from the Rabobank group, Euronet and BRE Bank SA—are preparing to follow suit.
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