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The Warsaw Voice » Special Sections » March 3, 2014
The Real Estate Voice
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Polish Real Estate Market: 25 years
March 3, 2014   
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Over the past quarter-century Poland has gone through extraordinary changes in almost all sectors. The changes on the real estate market have been especially notable.

The beginnings of the Polish market for modern commercial space date back to the 1990s, when the political and economic changes started. The free market economy’s development incubated a growing interest in the Polish market from international companies setting up their representative offices in Poland. A big problem was finding the right headquarters. Poland did not have a single high-class office building in the early 1990s, so the first foreign companies set up offices in tenement apartments or even in hotel rooms.

Class A buildings did not appear in Warsaw until the late 1990s. This was when the first building of the Atrium complex was built by Skanska. With such a small supply, rents attained record rates of up to $70 per sq m per month. Other Warsaw office buildings from this time include Kolmex, Warsaw Corporate Center, IPC Business Center, Aktyn Business Center, Fim Tower (today’s Orco Tower), Prima Court, Ilmet, Alma, Holland Park, Kaskada, Nautilus, Norway House, Sienna Center, Warsaw Financial Center, BTA Office Center, Wolf Zielna, Puławska Financial Center, Millennium Plaza, Saski Point, Warsaw Towers and Warsaw Trade Tower.

In the years that followed, office buildings in Poland began to be built to standards that were previously unheard of, not only here but in Western Europe. The Metropolitan building designed by world-famous architect Norman Foster is one such example. This building was fitted with all the latest technologies and architectural solutions, which subsequently became the standard everywhere.

For a long time, modern commercial real estate was built exclusively in Warsaw. The development of the office space market in Cracow, Wrocław, Poznań and Gdańsk and then other large cities across Poland did not really begin until the last decade, as investments in the BPO (Business Process Outsourcing) sector kicked off, for example.

In 2013 the supply of modern office space in Warsaw approached 4 million sq m, placing the Polish capital among well-developed medium-sized European cities, but this still seems insufficient given the country’s size. Each year a change of tenants takes place in properties totaling about 500,000 sq m. This is a decent figure testifying to rapid development of business: some companies increase their space, others move to newer facilities, others still seek new locations. After 20 years the modern office space market in Poland is properly developed and enjoys great interest from investors, both large investment funds signing deals for up to several hundred million euros and private investors interested in small projects or even single premises.

Prospective tenants have an extremely wide range of real estate to choose from in Warsaw, from the most prestigious facilities in the heart of the city to numerous buildings in business districts on the outskirts. Class A and B office rents in Warsaw have stabilized at 15-27 euros per sq m, depending on a building’s standard and location. Planned office projects in the Polish capital include ultramodern high-rises downtown and numerous business parks in more peripheral locations.

From stadium to shopping mall

The free market economy’s development in Poland enabled trade to flourish. At the outset of the transformation, enterprising Poles sold goods anywhere they were allowed—at bazaars, stadiums or on sidewalks. The symbols of the burgeoning free market were the ubiquitous folding tables and camp cots on which people laid out their wares. The biggest marketplaces in Warsaw at that time were Defilad Square and Dziesięciolecia Stadium. The stadium was considered one of the biggest marketplaces in Europe, with over 5,000 traders. A wide range of goods was sold at stores such as Wars, Sawa and Junior forming the Centrum Department Stores and at Smyk—all stores that are still in operation today though in a different format. The first modern shopping mall was Panorama, opened in 1993. It was quickly followed by Promenada, Land (1999), Galeria Mokotów (2000), Wola Park (2002), Blue City (2004), Arkadia (2004), Złote Tarasy (2007). True to global trends, the share of large shopping centers in retail trade grew steadily.

In the food sector, the launch of the Austrian Billa chain in Poland was a major event, as was the rapid development of a Polish supermarket chain, MarcPol. Later the market was dominated by foreign retail chain giants. The small number of modern shopping centers at the start of the Polish transformation meant that shopping space rents were sky-high at the time, $60-$80 per sq m per month.

A great many shopping malls were built in Poland over the past dozen or so years. At first these were only huge facilities with countless tiny stores, one mall being much the same as another. For some time now, things have been changing and shopping malls are getting architecturally interesting and have original interior design.

Economic changes opened up development possibilities in the warehouse and industrial segment, too. This segment emerged in accordance with market rules: stores quickly stocking up on goods and filling up their own space meant growing demand for storage and logistics services. The market was driven by wide availability of goods and services, the opening of the consumer market and the development of IT and telecommunications.

The first modern warehouse (ProLogis Park Warsaw, formerly known as Warsaw Industrial Center) opened in 1995. The greatest development of this segment took place over the past 10 years, with many large industrial parks being built in different regions of Poland.

Housing boom

Poland’s residential market also went through some fundamental changes. A free market in housing has been functioning in the country for some 20 years, as the first four or five years after the political changes were a time of its gradual emergence. Today the first years of the Polish transformation are seen as a period of structural changes aimed at building the foundations of a real estate market based on free market rules. The main conditions for this transition to be successful were the introduction of full ownership of residential real estate to replace the domination of cooperative home ownership rights and the market entry of banks and developers. The development of Poland’s residential segment in the 1990s was mainly due to its strong stimulation by the government, mostly by means of tax breaks for buyers of new apartments or people building their own houses.

The best period for the residential market in Poland was 2004-2008. The boom of this time was due to Poland’s European Union accession, which improved the economic situation and attracted foreign investors to the country. The risk of investing in Poland, especially in the real estate market, became much smaller.

Polish people seeking to acquire a new home, on the other hand, found that a radical loosening of banks’ lending policies opened up prospects for almost unlimited access to funding for housing. This ultimately led to a borrowing boom that raised housing prices by 100-150 percent or even more within just three to four years.

This was when the first elegant housing estates started appearing in Warsaw and other large cities, offering luxury apartments. The luxury apartment market began developing in the late 1990s, the first luxury estates being built solely in Warsaw. Later they began springing up in other cities: Cracow, Wrocław, Gdynia and popular resorts like Sopot, Jurata, Międzyzdroje and Zakopane. Luxury apartments in tourist destinations are an investment and a place to spend vacations somewhere perfectly suited to your needs. At other times of the year these homes can be leased commercially.

Specialists say that truly luxurious homes account for just 2-3 percent of apartments offered on the Polish market. It might seem that, compared to Western countries such as Britain, France and Germany, that is not a lot, but the Polish luxury apartment market is relatively young and still developing. Both there and here, though, you have to pay a great deal for a luxury apartment. Luxury costs money.

The unquestioned price leader on the Polish luxury residential market is certainly Warsaw, where the biggest number of such homes is built and sold. Warsaw prices vary, however, ranging from zl.11,000-zl.12,000 per sq m to over zl.40,000.

Luxury apartments are to be found in restored old tenements, row house developments, former factories but also skyscrapers. The global fad for residential towers reached Poland as well, and several such projects were begun. Unfortunately the economic crisis caused developers to pare down their plans. Many projects planned during the boom have been abandoned, some have been put on hold and some redesigned to better meet market needs. Warsaw has two such projects: Złota 44 and Cosmopolitan.

A boom in the residential segment was accompanied by a bull market on the Warsaw Stock Exchange, which was driven by developers and construction companies. Developers had no problems placing new share issues on the market at exorbitant prices, which stimulated the whole sector on one hand but contributed to a speculative bubble involving construction and developer companies on the other. In just two years (2005-2007) the shares of some developer businesses went up not just a few hundred percent (GTC) but even several thousand percent (Polnord, Gant). The five-year real estate boom was abruptly halted by the global financial crisis caused by the collapse of the U.S. real estate market, ultimately leading to the bankruptcy of Lehman Brothers bank and the global stock market collapse in autumn 2008.

For the Polish real estate market, the global crisis resulted in a few years of market slowdown coupled with a correction of housing prices and developer share prices.
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