Increasingly difficult to find suitable warehousing space in Poland
Real estate consultants CBRE believe that the office market in Poland has seen increased demand and a host of new developments, while the warehouse market is witnessing higher leasing activity and a limited amount of new space, which is resulting in lower vacancy rates.
The BPO sector is generating demand for offices
Even though GDP growth in Poland has slowed, demand growth for office space is holding strong. In the first three quarters of 2012, 455,000 sqm of office space in Warsaw was leased while in the whole of 2012 more offices will have been rented than in the year 2011, which saw a record 573,000 sqm of offices find tenants.
Joanna Mroczek, Director, Head of Consultancy & Research, CBRE in Poland: ‘In many Polish agglomerations such as Krakow, Wroclaw or Tricity, the amount of office space leased in the first three quarters of 2012 exceeded the total leased in the whole of 2011. This is connected mainly with the growth of the business process outsourcing sector (BPO), which already employs over 100,000 people in Poland. The most important BPO centres in our country are Warsaw, Krakow, Wroclaw and Lodz. The development of this sector is the main reason behind the growing demand for office space.’
Due to the fact that in recent years there has been a large number of newly launched office developments, the next two years will see a significant number of completions. At least in the short term the supply will exceed the capacity of the market to absorb new space. In the whole of Poland the supply of new office space will be around 600,000 sqm this year. In Warsaw there is currently 700,000 sqm under construction, while in eight of the biggest regional cities the figure stands at 510,000 sqm, which translates to 19% and 21% of existing resources respectively. The vacancy rate looks set to rise in the major agglomerations in the next two years, even though BPO tenants plan to employ more people. This results from the relative glut of speculatively built office space, which does not have pre-let agreements signed before construction starts. Taking into account the existing vacancy rate and the amount of office space under construction, the easiest places to find office space in regional agglomerations are Lodz, Tricity and Wroclaw.
Shifting Warsaw office districts
With almost 4 million sqm of office space, Warsaw is by far the biggest office market in Poland. In over 20 years of its existence, the capital’s office market has undergone significant changes. The first modern buildings, constructed in the early 90’s, are currently being modernized or even pulled down to make way for new projects. In the long term, new areas with a concentration of office buildings emerge due to investments in infrastructure. Office districts which evolved 10 years ago have experienced big changes and in many cases their borders have shifted. The city centre which is developing in a westerly direction is a good example, as is the case of Mokotow and Okecie which are slowly merging into one office district.
According to experts at CBRE, in the long term the construction of the second line of the Warsaw underground, new bridges and circular roads could increase the number of new office projects in those areas of Warsaw which up till now have seen less development. In the future, demand for office space in such boroughs as Bielany and Praga is likely to rise.
Prime office rents in Warsaw remain stable. In the city centre the rates for the best office space stand at 26 – 27 EUR/sqm/month, while in non-central locations the rates are 14 – 15 EUR/sqm/month. Growing competition from developers has not had a significant impact on rents in prime office buildings so far, but the incentives offered to prospective tenants are growing (e.g. rent free periods and cost sharing when it comes to fit-out). As a result, effective rates are even 25% lower than headline rates.
The warehouse market is ruled by caution but vacancy rates are down
According to CBRE, at the end of Q3 2012 the total warehouse space in Poland reached 7 million sqm, 390,000 sqm of which was completed in Q3 alone. A further 290,000 sqm is under construction. In Q3 lease agreements on 1.73 million sqm were signed, while the vacancy rate by the end of September was on average 12%.
Agata Czarnecka (below), Senior Consultant, Consultancy & Research, CBRE in Poland:
„Warehouse tenants are most active in the regions of Upper and Lower Silesia. The excellent transport infrastructure and the proximity of the German, Czech and Slovak markets are a significant factor in this. Tenants are still most wont to use road links for shipping and are willing to pay higher rents for warehouses in the vicinity of main roads. The most active tenants are in the FMCG sector, the car industry and in building materials.”
According to CBRE, in 2012 demand for warehouses will remain at around 1.8 million sqm, the same as in 2011 when a 20% increase in comparison to 2010 occurred. New developments usually have pre-let agreements in place before construction starts, some industrial assets are also being built to suit (BTS) the specifications of given tenants, however there is a paucity of speculative projects. CBRE expects the same situation in 2013 – with demand for new warehouse space stable, the vacancy rate is expected to drop, which could bring about a rise in rents in some areas.
Prime headline industrial rents in Poland are now around 2.80 – 3.50 EUR/sqm/month in Sector II (15 – 80 km from Warsaw), 3.00 – 3.50 EUR/sqm/month in Sector III (rest of Poland), and 4.50 – 5.00 EUR/sqm/month in Sector I (up to 15 km from Warsaw city centre). The vacancy rate is the highest in the east (30%), in the area of Szczecin (19%) and around Warsaw (17%), and the lowest in the vicinity of Krakow (6%), Poznan (6%) and the region of Silesia (5%).
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