Commercial properties in Poland in the years 1991-2011 and development prospects
The beginnings of the modern commercial space market in Poland date back to the 1990s, which were a time of major political and economic transformations. The developing free market economy kindled an increased interest in the Polish market among foreign investors. In the early 1990s there were only a few modern office buildings, including Intraco (built in the 1970s), the Elektrim building and the Silver Tower.
Paulina Misiak, Partner, Office Department, Cushman & Wakefield, says: “Rental rates at those buildings were exorbitant and reached USD 54 per square metre at schemes such as Intraco, for instance. Typical offices were located largely in administration buildings or tenement houses. They were small rooms on each side of a long corridor. The president’s office was the company’s executive suite.”
Warsaw was slowly becoming a large construction site. Office buildings delivered in the first decade of the economic transformation included the following (by date of completion): Kolmex, Warsaw Corporate Center, IPC Business Center, Aktyn Business Center, Fim Tower (now Orco Tower), the buildings of the Atrium complex, 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.
The 1990s were a period of privatisation and a dramatically growing number of new businesses. Ubiquitous tables, camp beds and street stalls were a symbol of the free market taking shape. The largest retail locations in Warsaw included the open-air markets at Stadion Dziesięciolecia and Plac Defilad. The former was considered to be one the largest marketplaces in Europe with over 5,000 retailers. The official trade in department stores took place at Domy Towarowe Centrum (Wars, Sawa and Junior) and Dom Towarowy Smyk, which continue to operate with a different format and character. The first modern shopping centre was Panorama, which was opened in 1993. Other shopping centres quickly followed, including Promenada (phase one in 1996, phase two in 1999 and phase three in 2005), Land (1999), Galeria Mokotów (2000, extended in 2002 and 2006), Wola Park (2002), Blue City (2004), Arkadia (2004) and Złote Tarasy (2007). The share of large retail schemes in the retail structure continued to rise in line with the global trends. Schemes of the first, second and third generation were built over a short time span.
Katarzyna Michnikowska, Senior Analyst, Valuation & Advisory, Cushman & Wakefield, says: “The opening of the first IKEA store in Poland was a true sensation on the market. The highlights in the food sector included the entry of Billa supermarkets onto the Polish market and the dynamic development of the Polish supermarket chain MarcPol. At that time rental rates for retail space reached astronomical highs of USD 60-80 sq.m/month.”
Industrial and warehouse space market
The economic changes in the 1990s opened new opportunities for the development of the industrial and warehouse sector as well. It developed in accordance with the rules of the market and the rapidly rising supply of products meant an increased demand for warehousing and logistics services. The availability of goods and services, the onset of the consumer market, the development of IT and telecommunications technologies drove the market development.
Joanna Sinkiewicz, negotiator from the industrial department at Cushman & Wakefield, says: “The first modern warehouse was established in 1995. At that time it was called Warsaw Industrial Center, later to be renamed ProLogis Park Warsaw. Rental rates amounted then to USD 12 sq.m/month.”
The current picture
According to the European Cities Monitor Warsaw is perceived by investors as one of the most attractive European locations for the future expansion of companies. Warsaw is ranked high in terms of low employment costs, supply and low costs of office space and business-friendly climate created by the Polish government.
Paulina Misiak says: “Compared to 1991, the supply of modern office space in Warsaw has increased by 1,400% from 250,000 sq.m to 3,500,000 sq.m. There are over 375 modern office buildings in Warsaw. The office space delivered in the last ten years is among the most modern of its kind in Europe both in terms of its standard and technical solutions. Such space is available, for instance, at Rondo 1 and Metropolitan. Separate offices and endless corridors have been replaced by open space and the reception desk instead of the office of the company’s president is now the company’s symbol.”
The market now offers a wide choice of space and average rental rates have fallen more than twofold compared to the former period. Headline rental rates in prime downtown locations reach EUR 24-27 sq.m/month, while in non-central locations they fall within the range of EUR 15.5-16.5 sq.m/month. A strong market trend is the development of business parks which are attractive mainly on account of the lower lease costs and expansion possibilities for tenants. Warsaw continues to be the main office market in Poland. As for regional cities, the largest office space stock amounting to the total of 1,913,000 sq.m is available in Kraków, Wrocław, Tricity, Katowice, Poznań and Łódź. Headline rental rates in these cities fall within the range of EUR 12-16 sq.m/month.
The Polish retail market is mature and attractive to institutional investors, developers, as well as retail chains and customers.
Katarzyna Michnikowska says: “In Poland there are currently over 370 shopping centres with the total floor space of 7,200,000 sq.m. As much as 56.5% of this space is located in the main urban agglomerations. The largest shopping centres such as Arkadia in Warsaw, Manufaktura and Port Łódź in Łódź offer over 100,000 sq.m of space. Currently, shopping centres are also under construction in smaller towns with 50,000-100,000 inhabitants. Both international and Polish professional developers and investors operate on the retail market. Retail space tenants include well-known Polish and foreign retail chains. The key players on the food market include Tesco, Carrefour, Real and Auchan. The DIY sector is represented by Castorama, OBI, Leroy Merlin and Praktiker. The highest rental rates for space in downtown shopping centres are recorded in Warsaw, where they stand at EUR 75-80 sq.m/month.”
Industrial and warehouse space market
The modern warehouse space stock in Poland now amounts to 6,500,000 sq.m. Most of this space was completed between 2004 and 2008. The years 2006-2008 were a boom period for the warehouse market as the demand for space exceeded the rate of new developments and warehouses were leased before their construction was completed.
Joanna Sinkiewicz continues: “Speculative construction ground to an almost complete halt due to difficulties with obtaining financing. Since 2009 tenants have become increasingly interested in built-to-suit schemes which, apart from the possibility of tailoring the technical specifications to individual requirements, can also be constructed in locations selected by the tenant.
"Such developments will unquestionably contribute to the development of the warehouse space market in new locations. Headline rental rates vary, depending on the region, and fall within the range of EUR 3-6 sq.m/month.”
The technological advancement and the related development of mobile technology will lead to a change in employers’ approach to the work environment and an increased popularity of working from home or any other place. Offices will continue to be places of meetings, presentations and the so-called quiet work.
Paulina Misiak says: “Green concepts and ecological initiatives will become an important criterion in space selection by tenants who care about the comfort of their employees. Regional Polish cities will develop and Łódź will be at the forefront of this development.”
Lifestyle changes will be reflected in what shopping centres will be offering. An increasing emphasis is being placed on extending catering and entertainment facilities. The rapid development of e-tailing may contribute to reducing the provision of retail schemes, particularly in the food and multimedia sectors. New distribution channels such as internet galleries or business concepts on social networking sites are already taking shape.
Katarzyna Michnikowska says: “The next twenty years will witness a return of retail to the city centre core, including in the form of department stores, with an increasing share of foreign luxury brands in the retail market. Plac Defilad in Warsaw as well as many other attractive areas in the centres of many Polish cities will finally be developed.”
Industrial and warehouse market
Joanna Sinkiewicz adds: “The current trend is to construct specialised warehouse complexes, which results from the ongoing globalisation and changes taking place on the logistics market. Fully automated and very high standard warehouse centres close to manufacturing plants will gain in importance in the future, while the warehouse centres will turn into warehouse towns with full infrastructure and the just-in-time service system. It will become possible to arrange modules freely and the size of such modules will be tailored to the individual needs of tenants leasing 50 sq.m or 5,000 sq.m.”
Many new distribution centres, including Szczecin, Rzeszów and Toruń, will appear on the warehouse market following the completion of the motorway network in Poland.