Marketbeat Poland – Spring 2007 - Ticaret Mark… · Office yields in Poland have been falling...

Marketbeat Poland – Spring 2007

introduction

This document is for general information purposes only. The information in it is believed to be correct, but cannot be guaranteed, and the opinions expressed in it constitute our judgement as of this date but are subject to change. Reliance should not be placed upon the information set out herein for the purposes of any particular transaction, and C&W cannot accept any liability whether in negligence or otherwise, arising from such use. This document cannot be reproduced in part or in full in any format without written approval from C&W.

© 2007 Cushman & WakefieldAll Rights Reserved

This report has been prepared by the Advisory Services Department of Cushman & Wakefield Polska to provide our clients with a summary review of the Polish real estate market at the end of 2006 and to present our forecast for 2007.

contents

Executive Summary 1

Economic Overview 2

Financial Markets Overview 3

Office Investment Market 4

Retail Investment Market 5

Industrial Investment Market 6

Offices 7

Retail 11

Industrial 15

Residential 21

Our Services 24

Cushman & Wakefield is the premier global real estate services provider, with more than 12,000 employees in over 55 countries.

We deliver, as a truly global real estate company, integrated solutions to our customers by actively advising, implementing and managing on behalf of landlords, tenants and investors through every stage of the real estate process.

These solutions include helping customers to buy, sell, finance, lease and manage assets. We also provide valuation advice, strategic planning and research, portfolio analysis, site selection and space location assistance, among many other advisory services.

MARkETbE AT POL AnD – SPR Ing 20 07

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economic overview

The Polish economy experienced rapid growth in 2006. The GDP growth at the end of 2006 was 5.8%, the highest level since 1997. The main reason behind this growth is domestic demand, generated by both consumption and growing investment expenditures. The unemployment rate fell from 17.6% at the end of 2005 to 14.9% at the end of 2006. Since the beginning of the 1990s Poland has attracted over EUR 70 bn in foreign direct investments. This amount not only assures Poland its leading position among all the countries of the region but also indicates that the Polish economy is competitive and orientated towards steady growth.

Financial markets overview

In 2006, the Polish Zloty (PLN) stabilized towards EUR and slightly appreciated against USD. Appreciation of the PLN is likely to continue in 2007. Low inflation caused a softening of the monetary policy in 2006. However, the high level of internal demand is a factor that might generate inflationary pressure. This in turn may cause a more restrictive monetary policy in 2007, which may make the Polish financial market relatively more attractive for international investors. For the third year in succession, the Polish capital market in 2006 broke all previous records. In 2007, the Warsaw Stock Exchange is forecast to continue its rising trend with the records of 2006 already beaten.

investment market

Total property investment volumes amounted to EUR 4.75 bn in 2006 with 2007 expected to exceed that. Offices were in second place to retail again, with shopping centres firmly in focus. A number of large retail transactions involving institutional investors have been completed recently. Industrial demand is also up but stock shortages have prevented a marked acceleration in investment volumes in the sector.

Office yields in Poland have been falling year on year, converging with Western Europe and reaching record levels of ca. 5.5% for prime office buildings in Warsaw’s Central Business District.

Prime retail yields were levelling at 5.5%-5.75% at the start of 2007 compared to 6.5% at the beginning of 2006.

Prime industrial yields are now in the region of 7% with potential for further yield compression.

oFFices

Demand for modern office space in Warsaw and across Poland has substantially increased. This trend is driven by an accelerating economy, foreign capital inflow and the fact that domestic companies are looking for cost reductions such as moving their back-office functions to regional cities. High demand resulted in decrease in vacancy (5.37% for Warsaw) and a rise in rental levels. Prime rents in Warsaw’s CBD increased between 10% and 20% depending on location, exceeding EUR 24 per sq.m in the best locations and the gross take up increased once again and reached a record level of 412,200 sq.m (10.5% more than in 2005). The average rents in regional cities are similar to Warsaw’s Non-Central Locations and range between EUR 11-16.

retail

At present, the modern retail space market in Poland totals approximately 6,300,000 sq.m. An additional 600,000 sq.m of modern retail space is under construction and a further 1,000,000 sq.m is at the advanced stage of development. Development activity in the shopping centre genre is currently being shifted to medium-sized towns (100,000-350,000 inhabitants), where the largest increase in supply is forecast for 2007-2008.

industrial

Poland has the most developed warehouse space market in Central and Eastern Europe. Apart from Warsaw, other dynamically developing markets are Poznań, Wrocław, Upper Silesia and Łódź. In 2006 new additional locations appeared on the map of modern warehouse facilities: Krakow, Tricity and Bydgoszcz. The booming development of regional markets was to a considerable extent a result of the improved road infrastructure, mainly motorways.

residential

At present, the Polish residential market is booming. As estimated, this tendency is likely to continue further. The key factors strengthening the Polish residential market are the EU accession, the recent increase in the overall standard of living and in purchasing power. The highest average price of ca. PLN 7,300 per sq.m is registered in Warsaw, followed by Krakow, Wrocław, Tricity and others. In 2007 the prices of residential units will continue to rise. However, the rate of price growth is expected to slow down.

executive summary

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� MARkETbE AT POL AnD – SPR Ing 20 07

economy

The Polish economy experienced rapid growth in 2006. The GDP growth at the end of 2006 was 5.8%, the highest level since 1997. The main reason behind this growth is domestic demand, generated by both consumption and growing investment expenditures. There are clear indications that consumer optimism has reached its highest level over the last eight years, demonstrating that people are now more secure in their jobs and are eager to spend more. In fact, the unemployment rate fell from 17.6% at the end of 2005 to 14.9% at the end of 2006. The Polish Zloty is expected to strengthen over the course of 2007 on the back of strong economic factors such as healthy productivity growth and investment trends, relatively low inflation and a narrow current account deficit. With annual disposable incomes increasing year on year over the last five years, people’s expenditures have followed suit. Additionally, the substantial increase in EU funds will have many benefits for the Polish economy, as the country will receive ca. EUR 10 bn per year over the next seven years.

reGional develoPment

After over seventeen years of economic and political reforms, Poland has become one of the fastest developing large countries in the EU. As a member of the EU, Northern Atlantic Treaty Organization (NATO), World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD), Poland is a reliable and trustworthy partner for international businesses. With its GDP growth rate estimated to reach well over 5% in 2007, Poland will continue to preserve its strong position in the coming years. The most developed of all the new EU members remains Slovenia (EUR 15,478 GDP per capita), followed by the Czech Republic (EUR 9,705 GDP per capita) and Hungary (EUR 9,318 GDP per capita), compared to Poland’s GDP per capita of EUR 6,204.

ForeiGn direct investments

Since the beginning of the 1990s Poland has attracted over EUR 70 bn in foreign direct investments. This amount not only assures Poland its leading position among all the countries of the region but also indicates that the Polish economy is competitive and orientated towards steady growth. A sustained strong retail sales growth rate, supported by the recovery of consumption should also influence the investment demand. CEE secured a significant part of FDIs due to its low risk, low labour costs and government incentives for foreign investors. Poland attracted EUR 6 bn of foreign investments in 2006. It is estimated that in 2007 FDIs should exceed EUR 7.5 bn.

GdP - reGional comParison

country GdP �006 (bn eur)*

GdP �006per capita (eur)*

GdP �006Growth (%)

bulgaria 22.00 2,860.89 5.5

Czech Republic 99.12 9,705.07 6.1

Estonia 10.82 8,009.06 10.5

Hungary 90.50 9,318.02 4.2

Latvia 13.77 5,960.31 10.2

Lithuania 21.35 6,254.37 7.6

Poland �36.65 6,�04.53 5.8

Romania 70.04 3,166.83 4.1

Russia 719.85 5,120.70 5.2

Slovak Republic 39.11 7,227.78 6.0

Slovenia 30.88 15,478.40 4.0

Ukraine 79.73 1,701.25 5.4

* Exchange Rate as of January 2007

Source: Cushman & Wakefield Advisory Services, IMF, February 2007

key economic indicators Poland �00� - �007

economic overview

Fdi in Poland �004 - �008

� MARkETbE AT POL AnD – SPR Ing 20 07

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excHanGe rates

In 2006, the Polish Zloty (PLN) stabilized towards Euro (EUR) with the average exchange rate amounting to PLN 3.88 in January 2007.

During 2006 the dollar (USD) slightly depreciated against the PLN and reached an average price of PLN 2.98 in January 2007. As a result of the strong PLN, investments at the Warsaw Stock Exchange (WSE) continued to be profitable for foreign investors.

Due to the stronger PLN, Poland’s foreign debt is declining and Polish purchasing power is rising. This trend is very likely to continue in 2007. A strong PLN is also acting as a buffer against the rise of inflation.

interest rates

Low inflation caused a softening of the monetary policy in 2006. The Polish Monetary Policy Council reduced interest rates twice during the year, from 4.5% to 4.00% – a historical minimum. However, the high level of internal demand is a factor that might generate inflationary pressure. This in turn may cause a more restrictive monetary policy in 2007, which may make the Polish financial market relatively more attractive for international investors. Simultaneously, the main foreign interest rates continued to grow, with a particularly strong increase in EURIBOR (EUR) which reached 3.61% in January 2007, while LIBOR (USD) interest rate increase was more moderate and reached 5.32% in January 2007. The majority of rental rates on the Polish commercial market are EUR-denominated and, therefore, most of investments are financed in EUR. EURIBOR (EUR) rates are still favourable for companies willing to finance and refinance their real estate investments. If there is only a marginal increase in interest rates, it is not foreseen to have a negative impact on capitalisation rates, primarily due to the weight of capital trying to enter the Polish market.

PolisH investment PerFormance

For the third year in succession, the Polish capital market in 2006 broke all previous records. The WSE main index WIG broke its historic level jumping from 35,600 to 50,411 points. In 2007, the WSE is forecast to continue its rising trend with the records of 2006 already beaten. This is not only explained by the positive influence of international markets, but also by a solid influx of foreign funds, resulting from increased trust in the Polish economy. The number of listed companies increased from 255 to 284 and because of the larger number of listed firms and higher prices the capitalisation of the market increased from PLN 425 bn in January 2006 to PLN 636 bn in January 2007, which constitutes a growth of ca. 50%.

Bond yields

Bonds �004 �005 �006*

2-Year T-bond Yield 6.90% 4.54% 4.57%

5-Year T-bond Yield 7.03% 5.23% 4.93%

10-Year T-bond Yield 6.85% 4.93% 5.19%

* Data as of end of 2006

Source: National Bank of Poland, Reuters, February 2007

eQuity market

index �006* �005* change �005/�006

WIg 50,411 35,600 41.60%

WIg20 3,285 2,654 23.70%

WIg Construction 85,539 35,659 239.00%

MIDWIg 3,733 2,207 69.10%

Capitalisation PLN 636 bn PLN 425 bn 49.60%

* Data as of end of the year

Source: Warsaw Stock Exchange, February 2007

Financial markets overview

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exchange rates in Poland �00� - �007

USD

interest rates �00� - �006

3

4 MARkETbE AT POL AnD – SPR Ing 20 07

Fundamentals

Throughout 2006, the sustained growth of the Polish economy has in part contributed to the stabilisation of the office occupational market and has greatly reduced any perceived risk of investment in Poland. Yields in Poland have been falling year on year, converging with Western Europe and reaching record levels of ca. 5.5% for prime office buildings in Warsaw’s Central Business District (CBD). CBD witnessed the lowest vacancy rate resulting in some of the highest rental levels in recent years with rents in prime schemes reaching up to EUR 24 per sq.m, and given the limited pipeline in the core CBD, this is set to continue. Meanwhile in Non-Central Locations (NCL), rental rates have remained more constant ranging between EUR 13-16. Despite the current lack of availability in NCL locations, the large number of schemes coming on stream over the next couple of years should ensure that rental levels remain relatively stable. In addition, as a result of this limited availability the level and extent of incentives landlords are offering in these prime locations have also fallen, especially in the core CBD where rent free periods now range between 2 and 6 months while in NCL tenants can expect to be granted between 4 and 12 rent free months for a five-year term.

demand

The large majority of investment transactions completed in the last four years can be attributed to investment funds. Other types of buyers accounted for a much smaller percentage of the market but were particularly active in smaller cities. The demand was generated by active international players from France, Germany, Austria, United Kingdom and Ireland. Over 95% of the total office investment transaction volume in 2003-2006 was generated by EU companies.

activity / deals

The largest number of office investment transactions were concluded in Warsaw, although regional markets continued to develop and more deals were closed in Krakow, Wrocław, Katowice as well as in other cities. This trend is likely to continue. Movement on the investment market will also be driven by new developments, as well as sale and leaseback opportunities.

The office investment market was very strong in 2006 with a number of the largest office developments in the region sold being Warsaw Trade Tower, Metropolitan and Rondo 1 to name only a few. The annual transaction volume exceeded the level of EUR 1.85 bn. Although more buildings were sold in Warsaw’s NCL, in terms of volume the CBD was dominant due to a few large transactions of over EUR 100 million. With regard to regional cities, more deals were transacted in these markets than any year previous and 2006 witnessed international investment funds become increasingly active in this market.

main oFFice investment deals in Poland in �006

Property city Purchaser vendor

Rondo 1 Warsaw London & Regional Hannover Leasing

Mokotów bP Warsaw Heitman gTC

Metropolitan Warsaw DEgI Hines

WTT Warsaw Akron group Apollo-Rida

Rondo 1 (50%) Warsaw Macquarie gPA London & Regional

brama Zachodnia Warsaw Immoeast Deutsche bank

Raiffeisen bC Warsaw Invesco (CEEII) Raiffeisen

Wiśniowy bP (buildings C - F)

Warsaw AIb Polonia Heitman

Europlex Warsaw Akron group bAWAg

Prokom gdynia Private investor Prokom Investments

Source: Cushman & Wakefield Advisory Services, February 2007

oFFice investment market

Prime yield �00� - �007

office investment deals �00� - �006


5

Fundamentals

2006 witnessed an exceptional increase in investment activity in Poland. The number of retail transactions in 2006 compared to 2005 grew by almost 60%. This increase intensified competition for quality products and “weight of capital” trying to enter the market created strong downward pressure on yields. At the start of 2007 prime retail yields were levelling at 5.5%-5.75% compared to 6.5% at the beginning of 2006. As the supply of attractive real estate in Warsaw is limited, the investment market is now expanding to include other cities such as Gdańsk-Gdynia-Sopot (Tricity), Poznań, Łódź, Krakow, Katowice and Wrocław. In 2006 a significant number of transactions were completed outside the capital in both small and large towns.

demand

The main players are foreign investment funds, and to a limited extent insurance companies and banks. The most predominant investment funds are Austrian, German, British, Spanish, US, Luxembourg and Israeli with AXA, GE Real Estate and ING REIM being the most active in the retail sector. Commercial real estate has also won the trust of domestic funds such as Arka BZ WBK and BPH. More and more private investors who are interested in smaller investments are also entering the market and increasingly tend to purchase lower-quality, higher-risk real estate. They usually act on their own or as part of a consortium.

activity / deals

2006 was a record year in terms of investment, not only in terms of the number of transactions, but also in terms of volume. The total volume of retail transactions in 2006 was at the level of EUR 2.7 billion, which is higher than the volume seen in 2005, and a large proportion was generated from portfolio deals. AXA purchased a retail portfolio from Apollo-Rida for ca. EUR 600 million and GE Real Estate purchased Géant portfolio for ca. EUR 555 million. Transactions included both developers exiting from fully let and pre-let buildings as well as sale and leaseback agreements. An example of a sale and leaseback transaction was the acquisition by W.P. Carey of 18 facilities from OBI AG for a total purchase price of approx. USD 200 million. Most transactions were recorded in regional cities, with over 78% of the total transaction volume. Given the strong investor demand and taking into consideration advanced negotiations such as the disposal of the Simon Ivanhoe portfolio, the number of investment transactions in 2007 is expected to remain at a very high level.

main retail investment deals in Poland in �006


Metro (49%) nationwide AXA Apollo-Rida

géant Portfolio nationwide gE Real Estate Casino groupe

ObI Portfolio nationwide W.P. Carey ObI

Okęcie RP Warsaw bPH TPI Caelum

Promenada Warsaw Dawnay Day ECC

galeria bałtycka TricityDeutsche

EuroShop AgHgA

Ahold PortfolioPoland &

Czech Rep.Ing REIM Ahold

Wars, Sawa, Junior Warsaw Ing REIM DTC

Pasaż Łódzki Łódź Pradera gE Real Estate

CH Plejada Sosnowiec St. Martins Tk Development

Alfa Centrum Olsztyn Arka bZ Wbk JWk Invest

king Cross Warsaw Ing REIM king Cross

Apsys Portfolio(Leader Price)

nationwide HPFM Apsys


retail investment market


retail investment deals �00� - �006

5


Fundamentals

2006 was marked by the expansion of Poland’s logistics markets with increased supply and demand in emerging regional industrial markets outside Warsaw. The inflow of EU funds and stronger domestic demand triggered investments from Polish companies. This, together with an improved road infrastructure and the continuing relocation of European production from Western to Central Europe, reinforced industrial fundamentals in Poland. The continued drive for warehouse and industrial properties resulted in further yield compression. Prime industrial yields are now in the region of 7% with potential for further yield compression.

demand

Since 2004, EU investors have been the dominant players in Poland’s industrial investment market, with over 63% market share, followed by US investors (22%). In 2006 Irish and UK investors were the most active on the market, followed by US funds. With industrial rents in Poland remaining at the lowest level in the CEE region, and together with strong macroeconomic fundamentals supporting healthy occupational demand, investment demand continues to grow steadily.

activity / deals

Although the Polish industrial investment market remains the least active in terms of the number of transactions and the total volume of investment, in comparison to the other two commercial sectors, the investment activity has doubled in 2006. The total volume of industrial investment transactions in 2006 reached approximately EUR 200 million (excluding preliminary purchase commitments). As regards the activity in early 2007, with limited number of modern logistics parks in Poland available for sale, investors are now more flexible in terms of range of products potentially to be acquired. In addition to prime properties let for long-term leases to good quality tenants, B-class stock with the need for redevelopment or partially vacant properties are now also being considered by potential investors. Given the owner occupier market across Poland, some sale and leaseback opportunities are likely to arise during 2007, including those being part of European portfolios. Forward funding and forward purchase transactions are also being negotiated and likely to be closed in mid-2007. Moreover, as some older stock is being redeveloped and released, more diverse products should be available for acquisition this year.

main industrial investment deals in Poland in �006


DbP Piaseczno Piaseczno AIg/Lincoln gLL

DbP Łódź Łódź AIg/Lincoln AIb Polonia

krakowskaDistribution Center

Warsaw ghelamco First Property

DbP Raszyn Raszyn Heitman Teesland iOg

Stolica Łazy Tkg International Pramerica



industrial investment deals �00� - �006

industrial investment market


7

PolisH market overview

A strong and accelerating economy together with the record level of FDIs have caused a substantial increase in the demand for modern office space in Warsaw and across Poland. Moreover, domestic companies are looking for cost reduction and are moving their back-office functions to regional cities such as Łódź, Lublin or to the Silesian Conurbation (Katowice). The overall modern office space stock in six major office markets in Poland amounts to 3,550,000 sq.m, out of which Warsaw’s stock accounts for over 72%. Growing demand has triggered increased activity of developers and many new developments were started. The new supply in all six major cities should reach 730,000 sq.m by the end of 2008 of which two thirds will be delivered in Warsaw alone.

suPPly and demand in warsaw

In the fourth quarter of 2006 the modern office stock in Warsaw amounted to 2,557,100 sq.m. The Non-Central Locations offered 59.6% of total Warsaw stock. The new supply increased in 2006 settling on just over 183,000 sq.m. The largest supply increase (30%) was seen in Upper Mokotów and in the City Centre Core. The positive trend will be sustained in the next few years as the supply is expected to at least 200,000 sq.m in 2007 and 300,000 sq.m in 2008. In 2007, 40% of new stock will be delivered in the CBD, whereas in 2008 only 25% (of those under construction) will be handed over. A limited number of new developments in the City Centre will keep the CBD market unbalanced in favour of landlords for the next 2-3 years. In 2007 the market will remain unbalanced as expected demand may be exceeding supply, however in 2009 and 2010, large new supply should balance the market and might even increase the vacancy to around 10% in the NCL.

In 2006 the gross take up in Warsaw increased once again and reached a record level of 412,200 sq.m (10.5% more than in 2005). Additionally, the net absorption rose y-o-y by 30%, settling at 243,000 sq.m. The largest demand levels were seen in Upper Mokotów (97,500 sq.m), in the City Centre Core (72,500 sq.m) and on the fringes of the City Centre (western perimeters – 61,250 sq.m, eastern perimeters – 52,750 sq.m). The largest demand growth has been noted in Ochota-Ursus-Włochy, where it rose by 33% reaching 55,000 sq.m.

As the profitability of the Polish economy and the GDP are growing, the demand for office space in Warsaw in 2007 should remain at high level. However, absorption may fall due to a limited number of planned completions. Due to the limited supply companies will sign the pre-leases to secure the office space that will be developed in 2008 and 2009.

oFFices

rents and vacancy in warsaw �000 - �007

net take-up and supply by year in warsaw �00� - �007

rondo �, warsaw

7


concentration of office space in warsawrents & vacancy in warsaw

Due to the fast growing demand and limited supply, the vacancy rate in Warsaw has once again dropped significantly. In 2006 on the y-o-y basis the average vacancy rate dropped by 2.8 percentage points to 5.37%. The vacancy rates in the CBD and NCL converged, due to the large absorption in the CBD. The largest decrease could be seen on the fringes of the City Centre, where the vacancy rate dropped by 10 percentage points.

In 2005 Upper Mokotów showed one of the lowest vacancy rates in Warsaw and during 2006 it dropped again to 2.9%. An increase in available space was observed in Ochota-Ursus-Włochy, where the vacancy rate increased to 10.2%. The low supply in 2007 will lead to a further drop in the vacancy rates in Warsaw, with average rates falling even below 4.5%. Availability of space in Warsaw should increase over the next few years, as the supply should be substantial.

The rents in 2005 were stable, however growing demand coupled with an insufficient supply in 2006 changed the market situation. Rents in the CBD increased by ten to twenty percent depending on the location. Prime rents in the best locations exceed EUR 24 per sq.m. As new large projects will be delivered no sooner than mid 2009, rental rates may increase even further and settle at around EUR 26-28 per sq.m.

The NCL market is expected to show different dynamics. Although the vacancy rates are low, new large projects delivered in 2009 and 2010 may oversupply the market and maintain pressure on rental rates (EUR 13-17). Among other NCL, Upper Mokotów and Wola are showing the highest rental rates (EUR 15-17). The vast amount of new developments in Upper Mokotów should keep effective rents at the same level, but it is probable that the headline rent may increase slightly.

Typical lease term is between five and ten years, but landlords may agree to shorter lease terms for space in older buildings. The scale and scope of incentives have changed in the last twelve months. In the CBD, rent free periods range from 2 to 6 months, but in NCL landlords are more flexible and rent free periods are between 4 and 12 months and landlords are offering additionally cash contributions.

warsaw market inFormation - Q4 �006

location cBd ncl

number of buildings 87 217

Stock 1,031,200 m2 1,525,900 m2

Total Vacant 55,000 m2 82,200 m2

Vacancy Rate 5.34% 5.38%

standard lease terms (a class)

location cBd ncl

Rent (m2/month) EUR 19 - 24 EUR 13 - 16

Underground Parking (lot/month) EUR 120 - 180 EUR 60 - 120

Surface Parking (lot/month) EUR 80 - 120 EUR 35 - 80

Service Charge (m2/month) EUR 4 - 6 EUR 3 - 5

Incentives

Cash contribution,Rent free period of 2 - 6 months,

Fit out contribution

Cash contribution,Rent free period of 4 - 12 months,

Fit out contribution

Lease Length 5 - 10 years

Add-on Factor 0 - 10%

VAT 22%

Indexation EUR or US CPI

Othersbank or parent company guarantee

or deposit


oFFices


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reGional cities

The regional markets have experienced a large increase in demand, triggered mostly by the FDIs. International corporations are opening shared services centres as well as business processing centres. Such requirements are usually in excess of 1,000 sq.m and can reach sometimes over 10,000 sq.m. On the other hand, the demand for space generated by local companies is rather small (around 50-200 sq.m). Middle size requirements are still rare in regional cities. The differences between those two types of clients can be also observed in the case of the office standards that they require and the typical lease length. Foreign companies usually expect B+ and A class buildings, whereas local ones are usually satisfied with B class or lower. As far as the lease length is concerned, local companies prefer short lease terms (three years) or even agreements for the undefined period whilst foreign companies prefer longer periods: from five to ten years.

Lack of middle size requirements puts some constraint on the market development. The largest demand for new office space can be observed in Wrocław and Krakow, however other cities are also getting more attention. The regional markets are still immature compared to the Warsaw market.

Comparing to the Warsaw market, the regional markets are quite small in terms of stock of modern office space. The next largest markets are Krakow and Tricity with 239,000 sq.m of office space each - 10 times smaller than the Warsaw market. In 2006 the increase in supply was unimpressively small, around 2% (except Poznań, where the supply rose by 6%) compared to 2005 when the modern office stock rose by 8%. Limited supply and growing demand have reduced availability of space. Space units of 1,000-2,000 sq.m are a rarity on the market, especially in Krakow and Poznań. As the majority of supply will be delivered in 1.5 year time, regional markets should become more balanced by the end of 2008. The majority of new office space will be delivered in Wrocław and Krakow.

In other cities buildings are usually smaller than in Warsaw with the average size of a new building of around 6,500 sq.m. Most of them are located close to city centres but not in the core area. Business parks are currently on the rise in regional cities, as the developers are targeting their buildings at sizeable tenants. Most of such parks are being developed on the city centre fringes or on the city outskirts in the vicinity of local airports (Strzegomska Business Park in Wrocław, Krakow Business Park). Availability of land in those areas enabled international developers to acquire sites and start building such office parks.

oFFices

distances Between warsaw and other modern office markets

investment centres in Poland

modern office market in Poland

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�0 MARkETbE AT POL AnD – SPR Ing 20 07

reGional cities

The occupancy costs in regional cities are lower than in Warsaw. The average rents are similar to Warsaw’s NCL. The rents range from EUR 11-16, where Krakow has the highest prices. The rent for A class buildings is EUR 14-16 and for B class buildings - EUR 11-14. Even though the rent level is a function of demand and supply rents usually do not exceed EUR 15. The lowest prices of EUR 11-12 can be achieved in Non-Central Locations in B class buildings for large tenants.

The large demand from single tenants cannot be met by the existing buildings and they have to wait until the whole new project is developed. This is positively influencing the market raising the total stock and giving no pressure on rents. Limited supply in 2006 and high demand pushed down the vacancy rates significantly during the whole last year. The vacancy rates are around 3-8%, where the lowest rates can be observed in Krakow and Wrocław. The supply in 2007-2008 will rise substantially and the vacancy rates may increase.

Because of the low stock, the development of a few large projects can strongly influence the market, raising vacancy rates and lowering rents. We might expect to observe this phenomenon in Wrocław and in a few years in Krakow. The location that might have good prospects is Silesia with the largest city Katowice. The whole region’s urban population is over 3 million people. The specialized labour pool is large and will attract more investors in the near future. The regional cities markets have good prospects, however it will strongly depend on the demand from foreign investors. Local companies are at present not interested to lease office space in modern office buildings to a large extent. However, this may change in the next two to four years.

Incentives are usually scarce and narrowed to short rent free periods. Additional costs such as service charges are lower than in Warsaw and range between EUR 2.5-4. Rents for parking spaces are also lower. Surface parking spaces are usually for free in business parks but those paid are from EUR 20 to EUR 40 per lot. Rents for underground parking spaces range from EUR 40 to 90.

larGest oFFice BuildinGs in reGional cities

city Building size

krakow buma Square business Park 27,000

Tricity LOTOS Park (HQ) 23,000

katowice Opolska 21,000

Tricity Prokom 19,900

Tricity ERgO HESTIA group (HQ) 15,000

Poznań Poznan Financial Centre 14,500

katowice Chorzowska 50 14,200

krakow Cracovia business Center 13,650

Wrocław Centrum Orląt 13,344


oFFices

stock and Projects in the Pipeline in regional cities in Poland

market Predictions For �007

city supply demand rents vacancy yield

Warsaw CbD g h h i i

Warsaw nCL g h g i i

krakow h h g g i

Wrocław h h g g i

Tricity g g g g i

Poznań h g g g i

katowice g h g g i



��


The dynamic development of modern retail space in Poland since the 1990s was connected with the introduction of hypermarket chains into the market. Intensive investment activity in shopping centres occurred in all major cities, attracting international and domestic retail chains. The segment of large-surface non-food stores, including DIY and home decoration stores, also continued to develop. At the end of the 1990s the offer of shopping centres was enriched to include leisure (multiplexes and fitness clubs) and catering facilities as well as large-surface fashion stores and supermarkets.

Alongside increased competition, hypermarket chains began development strategies based on the construction of smaller stores in medium-sized towns, and the market recorded an entry and a dynamic development of several international chains of supermarkets and food discount stores. The years 2003-2007 are a period of development of downtown shopping and leisure centres in the largest Polish cities. As the market matured, new retail concepts began to appear: factory outlet centres and out-of-town retail theme parks.

At present, the modern retail space market in Poland includes approximately 6,300,000 sq.m. An additional 600,000 sq.m of modern retail space is under construction and a further 1,000,000 sq.m is at the advanced stage of development. The most active segments are shopping centres, large-surface non-food stores, as well as supermarkets and food discount stores.

Shopping and leisure centres constructed are largely downtown schemes with a rich assortment of shops, services, cafés, restaurants, and sometimes include a cinema, a fitness club or an entertainment centre. Development activity in the shopping centre genre is currently being shifted to medium-sized towns (100,000-350,000 inhabitants), where the largest increase in supply is forecast for 2007-2008, including Białystok, Lublin, Częstochowa, Gliwice, Rzeszów, Rybnik, Opole and Słupsk.

The process of remodelling the large-surface non-food stores concentration into out-of-town theme retail parks is now taking place. DIY stores continue their development by constructing smaller outlets in medium-sized towns. Supermarkets and food discounts stores are expanding in housing estates of large and medium-sized towns.

Limited investment activity is also taking place in the high streets of the largest Polish cities, including Chmielna Street in Warsaw, Old Market in Krakow, Stawowa/3 Maja in Katowice, Półwiejska Street in Poznań and Świdnicka Street in Wrocław.


city supply demand Prime rent vacancy yield

Warsaw h g i i i

Łódź g g i g i

krakow h g i i i

Wrocław h g g g i

Poznań h h h g i

Tricity h h h g i

Szczecin g g g g i

U. Silesia h h g g i

Other* h h h i i* Other Polish cities between 100,000 and 350,000 inhabitants.


retail

modern retail supply in Poland ��8 - �008

Złote tarasy, warsaw

��

�� MARkETbE AT POL AnD – SPR Ing 20 07

HiGH streets

As a result of the dynamic development of shopping centres and the limited stock of modern space available in high streets, expansion strategies of international and domestic shopping chains are focused on shopping centres. The first shopping scheme combining the concept of a shopping centre with high street was the Business and Art Centre Stary Browar in Poznań, largely attributed to its location in Półwiejska Street. The demand for modern space in high streets is rising alongside the entry onto the Polish market of exclusive retail brands such as Burberry, Escada and Hugo Boss. For the needs of such tenants, limited investments are made in the modernisation of existing tenement houses for retail, catering and entertainment purposes, among others in Warsaw and Krakow. In 2006 the slight downward trend of traditionally stable rents in high streets was broken and the highest rental rates in locations reached EUR 75-80 sq.m/month.

sHoPPinG and entertainment centres

The shopping centre market is booming in Poland both in terms of stock and quality of newly-opened schemes. The peak supply in the shopping centres genre occurred in 1998-1999, when over 1,000,000 sq.m of floorspace came onto the market. In the early stages of development, shopping centres were constructed mainly for the needs of hypermarket chains, including Auchan, Casino/Géant, Carrefour, Metro AG/Real and Tesco. These developments comprised a hypermarket, a small shopping gallery and frequently a large-surface non-food DIY store. Alongside the market development, larger schemes began to appear, anchored by delicatessen stores (e.g. Alma, Bomi and Piotr i Paweł), large-surface fashion stores (e.g. H&M, C&A, P&C, Zara, Reserved and Smyk) and multiplexes (Cinema City, Multikino and Silver Screen). They were built in downtown locations and now enjoy the greatest interest of consumers.

At the end of the fourth quarter of 2006, retail floorspace in shopping centres in Poland totalled 3,700,000 sq.m (230 schemes). The largest shopping centres are now: Manufaktura in Łódź (completed in 2006) and Arkadia in Warsaw (completed in 2004). In 2006 approximately 400,000 sq.m of space in shopping centres was completed. Manufaktura Łódź (109,000 sq.m) and Galeria Krakowska (60,000 sq.m) were important schemes for the market. 2006 was also a year of extension for existing schemes and refreshing the assortment of tenants in order to make shopping centres more attractive, given the increasing competition at the market.

retail

High street rents in selected cities �000 - �006

shopping centres in selected cities ��8 - �008

shopping centres Gla per �000 inhabitants


�3

sHoPPinG and entertainment centres

The demand for space in shopping centres remains at a high level and is concentrated on downtown shopping centres, given low average vacancy rates. The highest vacancy rate of over 0.5% in shopping centres is noted at the most competitive markets of Warsaw, Krakow, Łódź, Szczecin and Tricity. The demand for floorspace in shopping centres is driven mainly by sectors such as food, fashion, electronic equipment, services and catering.

Investment activity in the shopping centre genre in Poland is rising as at the end of the fourth quarter of 2006 approximately 550,000 sq.m of modern space was under construction. The largest schemes to be completed in 2007 and 2008 are as follows: Złote Tarasy in Warsaw (opened on 7 February 2007), Galeria Malta Poznań (scheduled to be opened in the fourth quarter of 2008), Arkady Wrocławskie (second quarter of 2007), Forum Gliwice (second quarter of 2007) and Galeria Bałtycka Gdańsk (fourth quarter of 2007). The years 2007-2008 are a period of building shopping centres in medium-sized towns. They will become the main object of interest among consumers, developers, retail chains and investors in the nearest future. It is projected that space in shopping centres in medium-size towns will amount to approximately 800,000 sq.m by the end of 2008. Schemes planned include Pl. Kościuszki Bytom, Alfa Białystok and Galeria Rzeszów.

Rental rates for space in shopping centres differ depending on the quality and location of schemes and reach record levels of EUR 80-90 sq.m/month for prime schemes, in comparison to the average rent of EUR 30-35 sq.m/month.

HyPermarkets / suPermarkets

It is estimated that over 180 hypermarkets (approx. 2,000,000 sq.m) located mainly in shopping centres are currently operating in Poland. This sector is dominated by foreign chains such as Auchan, Carrefour, Real and Tesco.

In 2005-2006 there was a dynamic consolidation process in the food sector in Poland. The chain of Géant hypermarkets was taken over by Real, and Hypernova/Ahold was taken over by Carrefour. The process of consolidation is also taking place with smaller food stores following the purchase of Leader Price by Tesco, Albert/Ahold stores by Carrefour and miniMall supermarkets by Billa.

Supermarkets and food discount stores continue to develop dynamically with leading chains such as Biedronka, Kaufland, Lidl and Tesco. Domestic chains Alma, Bomi and Piotr i Paweł have developed a delicatessen, specialised food offer for the market.

Market rental rates for hypermarket space stand at EUR 6.0-7.5 sq.m/month, whereas rental rates in supermarkets fall within the range of EUR 7.0-11.5 sq.m/month.

retail

vacancy rate in selected cities

Prime shopping centres rents in selected cities

Hypermarkets chains in selected cities

�3


retail wareHousinG

The expansion strategies of large-surface non-food stores in Poland have been based so far on own investments or co-investments – this applies particularly to DIY stores. In 2006 the first sale and leaseback transaction was made in this sector: OBI sold its portfolio of stores to W.P. Carey International. Castorama remains the leader among DIY stores and it is also developing a smaller concept of stores: Bricodepot. There is an increasing number of lease transactions, particularly in the electronic equipment, sports and home decoration sectors. In 2005-2006 the competition in the electronic equipment sector increased considerably following the entry of the Electro World stores (Dixons) chain into Poland.

The concentration process of stores into out-of-town theme retail parks is taking place. The leader in the market of retail parks in Poland is IKEA, which is constructing seven retail parks of the “everything for the family profile” in successive phases. The next phase of IKEA Targówek and IKEA Bielany Wrocławskie Retail Parks was completed in 2006. IKEA plans to construct a Retail Park in Łódź and to extend IKEA Franowo Retail Park in Poznań in the nearest future.

At present, there is approximately 1,000,000 sq.m of space in large-surface non-food stores in Poland, and a further 250,000 sq.m is in the pipeline. Rents for this type of space (over 5,000 sq.m) fall within the range of EUR 6.0-7.5 sq.m/month.

Factory outlets

Factory outlet centre projects are a relatively new retail concept in Poland. There are five existing schemes of this type with the total floorspace of over 60,000 sq.m, located on the outskirts of the largest urban areas: Warsaw, Wrocław, Tricity and the Silesian Conurbation. There are two key players operating at the market: a Spanish company Neinver and a British company The Outlet Co. There are other schemes of the Neinver company in the pipeline, including Factory Luboń near Poznań and Factory Krakow.

The existing schemes are constructed in phases alongside the development of the retail market and the demand for this distribution channel of goods from domestic and international retail companies. The first phases include approximately 10,000 sq.m of rentable space. Such stores offer mainly reduced price and end of line items as well as damaged products.

Rental rates for floorspace at factory outlets reach the levels of EUR 6.5-21.0 sq.m/month depending on the scheme, sector and size of space rented.

larGest sHoPPinG centres comPleted in �005 - �006

name city opening shops anchor tenants

Manufaktura Łódź 2006 225 Real, Leroy Merlin, Cinema City

galeriakrakowska

krakow 2006 270 Albert/Carrefour, Saturn

Silesia CityCenter

katowice 2005 240 Tesco, Cinema City, Saturn

Marcelin Poznań 2005 130 Real, Media Markt

Arena gliwice 2006 80Carrefour, Leroy Merlin,

Mix Electronics

galeria kazimierz

krakow 2005 160Alma, Cinema City,

Euro RTV AgD

Plaza Poznań Poznań 2005 180 Piotr i Paweł, Cinema City


retail

Factory outlet centres in Poland

diy market share by number of shops in Poland


�5


Poland is currently one of the most dynamic and attractive warehouse markets in Europe. The country hosts transport routes linking Western Europe and Russia as well as the Balkans and Scandinavia, and therefore Poland has the most developed warehouse space market in Central and Eastern Europe.

The year 2005 was a crucial period for the Polish market due to the rapid increase in demand and supply in regional cities such as Poznań, Wrocław, Upper Silesia and Łódź. In that year the proportions between Warsaw and other cities with regard to the volumes of modern warehouse space began to change: from the end of 2004 until the end of 2006 Warsaw’s market share fell from 80% to 60%.

In 2006 new additional locations appeared on the map of modern warehouse facilities: Krakow, Tricity and Bydgoszcz.

So far warehouse centers have been concentrated in the central, southern and western parts of Poland, but recently developers have also begun to offer modern warehouse space in the North. The eastern part of the country, however, does not as yet have any large logistics parks for lease. This results mainly from a poorly developed road infrastructure and low purchasing power in this region.

The booming development of regional markets was to a considerable extent a result of the improved road infrastructure, mainly motorways. Upper Silesia and Central Poland are developing thanks to the proximity of existing and planned motorways (A4 and A2, and the intersecting A1 motorway, respectively). In the region of the planned hub at Stryków linking the A1 and A2 motorways, huge industrial parks are being built and more and more developers are looking for land to purchase.

Gdańsk can also greatly benefit from the completion of the A1 motorway connection. The first phase, from Gdańsk to Grudziądz, will be completed by the end of 2008 and the construction of the other stretches (from Grudziądz to Toruń and from Toruń to Stryków) will not start until in a year’s time. Warsaw’s position against this background looks exceptionally weak, as it will have to wait for the extension of the A2 motorway at least until 2010.

Parkridge distribution center warsaw


region supply demand rents vacancy yield

Warsaw h g g g i

Poznań h h h g i

Wrocław h h h g i

U. Silesia h h h g i

krakow g g g g i

Central Poland h g g h i

Tricity h h h g i

Source: Cushman & Wakefield Advisory Services, www.industrial.pl, February 2007

industrial

demand by sector in �006

�5


suPPly

Varied expectations of clients affect the method of scheme construction. Companies looking for small and medium-sized space (from 3,000 to 10,000 sq.m) expect a quick building delivery, as a result of which the demand for speculative buildings (i.e. constructed without leases) is being driven by them. Such clients are usually willing to pay a small premium as part of the rent (5%-10%) for a building to be ready almost immediately. Main locations of speculative schemes include Upper and Lower Silesia and Poznań. Companies looking for large space (from 10,000 sq.m and up) prepare their development strategies well in advance and, therefore, the time of a building delivery is not of such importance. They attach, however, greater significance to having the most optimal location possible, which would enable them to economize on transportation, to tailor the technical parameters of a building to individual requirements and to have the lowest rent possible. Such buildings are constructed upon the client’s individual order on a plot of land previously selected (the built-to-suit system). The advantages of this system include the possibility of adaptation to the most unusual tenant requirements and a lower lease price than in the case of speculative buildings. An important disadvantage, however, is the time required to complete such an investment. In the case of construction preceded by a prior search for a plot of land, it takes approximately 18 months. The construction process itself is usually quite quick (from four to six months), but a significant amount of time is necessary for choosing a site, checking its legal and building status and obtaining administrative permits. A compromise between speculative construction and the “built-to-suit” system is the more frequently used system, consisting in securing land by the developer, obtaining a building permit and then offering clients the possibility of constructing a building at their individual specifications in a given location.

demand

2006 was a record year in terms of the volume of lease transactions made. The total demand amounted to 913,000 sq.m, which was over 50% higher than in 2005. As many as 30% of lease transactions (280,000 sq.m) were made by logistics operators. The greatest demand was recorded in the Warsaw region (285,000 sq.m), and Upper Silesia (195,000 sq.m.). It is an attractive location on account of its proximity to the southern border and the very well developed road infrastructure – that is why large logistics centres are springing up here. The most dynamic development, thanks to the proximity to Germany and the Czech Republic, was noted in Wrocław, where the demand in 2006 amounted to 165,000 sq.m (four times higher than in 2005). There was also an increased demand in Central Poland (125,000 sq.m) and Poznań (118,000 sq.m). In the new warehouse region of Tricity, the demand in 2006 amounted to 18,000 sq.m. However, the first warehouse space was only completed in January 2007. Due to low supply in Krakow in 2006, lease transactions were made only for 7,000 sq.m.

industrial

developers market share in �006

existing stock by location in �006

vacancy rate in selected cities


�7

warsaw

The Warsaw market is the largest warehouse space market in terms of supply in Poland (1,580,000 sq.m). Its distinguishing feature is the distinct division into three zones.

Zone 1 is within 12 km from the city centre. Most warehouse parks in this zone are located in the south-western districts (Okęcie and Służewiec) and the northern districts (Targówek and Żerań). The supply in zone 1 stands at 480,000 sq.m. Tenants usually include companies selling high value consumables (e.g. electronic equipment, top quality cosmetics and pharmaceuticals) and distribution operators. The average space leased is 300-3,000 sq.m. Nominal rental rates can reach as much as EUR 6.00 per sq.m, whereas effective rental rates remain at the minimum level of EUR 4.50 per sq.m. In 2006 the total volume of lease transactions in this zone amounted to 75,000 sq.m.

Zone 2 is within 12-30 km from the city centre. Most warehouse parks are concentrated in Piaseczno, Ożarów Mazowiecki, Błonie, Nadarzyn and Pruszków. The supply in zone 2 amounts to 840,000 sq.m. This zone offers very favourable conditions, because rent is much lower than in zone 1 as nominal rental rates are at the level of approx. EUR 3.3 per sq.m and effective rental rates do not exceed EUR 2.7 per sq.m. The average space leased is 2,000-10,000 sq.m. In addition, it offers better transport infrastructure linking it with the other regions in Poland, which makes it an attractive location for logistics companies as well as manufacturers and distributors of consumables provided most often for the local consumer market. In 2006 the total volume of lease transactions in this zone amounted to 140,000 sq.m.

Zone 3 is within 30-50 km from the centre of Warsaw. Most warehouse spaces are located in Mszczonów, Teresin and Sochaczew. The supply of zone 3 amounts to 260,000 sq.m. The schemes of this zone target mainly the largest tenants by attracting them with low prices. Nominal rental rates are at the level of EUR 3.2 per sq.m and effective rental rates do not exceed EUR 2.6 per sq.m. In 2006 the total volume of lease transactions in this zone amounted to 70,000 sq.m.

An important factor which is beginning to shape the map of warehouse spaces in the Warsaw region is the planned completion of the A2 motorway. In addition, a reconstruction program also provides for the modernisation of trunk road junctions in Warsaw and other trunk roads within the Warsaw agglomeration.

warsaw area market overview �006

existing stock 1,580,000 m2

stock under construction 121,000 m2

vacancy rate 8%

demand 285,000 m2

nominal rents EUR 3.2 - 5.2 m2/month

effective rents EUR 2.6 - 4.8 m2/month

major landlords

Parkridge*, ProLogis, bel Properties, Menard Doswell, Apollo-Rida, Altmaster,

Metropol group, Europa Distribution Center, ghelamco, AIg/Lincoln

warsaw area deals �006

Building company size

Parkridge DC Sochaczew Procter & gamble 27,000 m2

ProLogis Park Teresin Tesco 18,000 m2

Parkridge DC Warsaw Toya 11,000 m2

* in February 2007 acquired by ProLogisSource: Cushman & Wakefield Advisory Services, www.industrial.pl, February 2007

take-up by sector in warsaw �ii

take-up by sector in warsaw �i

take-up by sector in warsaw �

industrial

�7


PoZnań

The transport infrastructure in Poznań determines the region’s development on account of the quite rapid construction of the A2 motorway. Its completion is planned for the years 2008-2010 and it will contribute to strengthening the position of Poznań in the warehouse space market.

A distinguishing feature of the Poznań market is the large share of warehouse space occupied by target owners. This proportion, however, has been changing over the last two years due to the very dynamic development of the commercial warehouse space market. At present in Poznań, there are eight warehouse parks totalling approximately 370,000 sq.m with a further 175,000 sq.m under construction. The locations favoured by tenants are the parks along the A2 motorway and near the intersection of the A2 motorway with the S11 express road. The parks along the former main road from Warsaw to Berlin (E30), where space is leased mainly by companies operating in the local Poznań market, have retained their importance.

In 2006 the demand for warehouse space in the Poznań region amounted to 118,000 sq.m. New tenants include mainly chain stores, logistics operators and light industry companies. A further increase in speculative warehouse space and tenant-tailored space is expected.

wrocław

Lower Silesia is an ideal location for companies cooperating with regional manufacturing companies. The warehouse space market is developing dynamically because of the construction of the transport infrastructure (A4 motorway linking Lower Silesia and Germany) as well as favourable economic conditions and the involvement of the local authorities attracting foreign investors. The investors in this region include: Cussons, Volvo, ABB, Cargill, Bosch, Siemens, Wabco, Brandt, Alfa Laval, Bombardier Transportation, Maco Pharma, 3M, Whirlpool, Fagor, Hewlett-Packard and LG Electronics.

In 2006 the demand for warehouse space in the Wrocław region amounted to 165,000 sq.m. New tenants are mainly logistics operators, companies from the electronic equipment, pharmaceutical and food sectors. At present, Lower Silesia has three warehouse parks located in the immediate proximity of the A4 motorway. Tenants include mainly companies serving the local consumer market, but due to its strategic location this region is also beginning to attract the interest of major logistics operators and foreign-capital companies which chiefly export their products to the Czech Republic and Germany. It is estimated that the supply will grow due to the increased interest in warehouse space among foreign investors.

take-up by sector in Poznań

take-up by sector in wrocław

industrial

PoZnań area market overview �006

existing stock 370,000 m2


vacancy rate 10.56%

demand 118,000 m2



major landlords Panattoni, Slough Estates, Parkridge*, ProLogis, Liebrecht & Wood, CLIP

PoZnań area deals �006


Panattoni Poznań H&M 53,000 m2

ProLogis Park Poznań II Lidl 9,000 m2

Tulipan Park Poznań Huntleigh 12,000 m2


wrocław area market overview �006



vacancy rate 7.87%

demand 165,000 m2



major landlords ProLogis, Parkridge*, Tiner

wrocław area deals �006


ProLogis Park Wrocław HI-P 19,000 m2

ProLogis Park Wrocław Carlsberg 18,500 m2

Parkridge DC Wrocław nYk Logistic 12,600 m2



��

uPPer silesia

Upper Silesia is the most important industrial region in southern Poland. Five million people live within a 100-kilometre radius from the Silesian Conurbation, which also makes it a huge consumer market.

This region is considered to be a very good location for large logistics centres operating for the Central European market, because of the proximity to the Czech Republic and Slovakia, and a good road infrastructure. Special economic zones and easy access to qualified human resources are attracting more investments in industry, particularly light industry. The Silesian Conurbation has very good transport connections with the European transport network. Two main transport corridors intersect in this area: corridor III Berlin-Wrocław-Katowice-Krakow-Lvov and corridor VI Gdańsk-Katowice-Żylina. The construction of the A1 motorway and the interchange linking it with the existing A4 motorway in Gliwice will further strengthen the position of Upper Silesia as a logistics location. At present, there are eight warehouse parks totalling 350,000 sq.m in the region and over 125,000 sq.m is under construction. Due to the urban structure of Upper Silesia, warehouse parks are evenly spread, which results from the absence of a clearly defined centre of the conurbation. Rental rates for warehouse space in the entire conurbation are comparable and there are no significant differences between individual locations. This also applies to prices of land. The final price is affected by the legal status of plots of land and the proximity to slip roads leading to the A4 motorway.

In 2006 the demand for warehouse space amounted to 195,000 sq.m. New tenants included mainly logistics operators and companies from the electronic equipment, food and automotive sectors as well as chain stores. Given the ever increasing interest in warehouse space, it can be predicted that in Upper Silesia new warehouse parks will be constructed and the existing ones will be extended.

krakow

Krakow is located near the Silesian Conurbation and the southern border of Poland. The A4 motorway offers a quick connection with Silesia, Wrocław and the German border. As a result of the intensive development of the airport and the large consumer market, increasingly more companies are showing interest in Krakow and surrounding areas. This is leading to an increasing demand for modern warehouse space.

There is 8,000 sq.m of modern warehouse space available and a further 10,000 sq.m is under construction. However, the demand for modern warehouse space in Krakow can be expected to increase soon.

take-up by sector in upper silesia

take-up by sector in krakow

industrial

krakow area market overview �006



vacancy rate 0%

demand 7,000 m2



major landlords bIk

krakow area deals �006


Centrum Logistyczne kraków Rovita Sp z o. o. 1,700 m2

Centrum Logistyczne kraków CEDC Carey 1,700 m2

Centrum Logistyczne kraków kMC Services 1,700 m2


uPPer silesia market overview �006



vacancy rate 8.70%

demand 195,000 m2



major landlords Parkridge*, ProLogis, bel Properties

uPPer silesia deals �006


ProLogis Park Chorzów Raben Polska 19,500 m2

ProLogis Park Chorzów FM Polska 17,500 m2

ProLogis Park Chorzów Reporter 13,400 m2

Parkridge DC Dąbrowa górnicza Intier Automotive 8,500 m2


��


central Poland

Warehouses in Central Poland are concentrated in three locations: Łódź, Piotrków Trybunalski and Stryków. Because of its central location, this region is ideally situated for nationwide distribution centres. There are nine existing warehouse parks in the Central Poland region offering 265,000 sq.m and a further 190,000 sq.m is under construction. Given the investment potential of land, the supply can increase over a dozen times in this region if there is enough demand. Main tenants in this region include logistics operators and companies from the electronic equipment, food, fashion, packaging manufacturing and cosmetics sectors.

In Łódź warehouse parks are located mainly in the surroundings of the Widzew district. Main tenants are sub-suppliers for manufacturing companies in the region: Dell, Gillette, Indesit Polska and Bosch. Transactions are made on rather small units: on average 2,000-4,000 sq.m.

Piotrków Trybunalski offers an abundant supply of modern warehouse space and low demand. Availability of land is considerable and it is cheaper than in other regions. Rental rates here are the lowest in Poland, which is the reason for this location to be favoured by large tenants. The following developers have located their warehouse parks: IIG, Logistic City, ProLogis, Parkridge and Slough Estates.

The most favourable location in Central Poland in terms of road infrastructure is Stryków. This area is developing rapidly because of plans to construct an interchange of A1 and A2 motorways in the vicinity of Stryków. There was 112,000 sq.m of modern warehouse space under construction and 79,500 sq.m of space available in this region at the end of 2006.

tricity

The market for modern warehouse space in Tricity is at its early stage of development. Access to the Baltic Sea through the ports in Gdynia and Gdańsk, construction of a deep-water container terminal in the port of Gdańsk and the A1 motorway built to connect Tricity with Central and Southern Poland will all stimulate an increased interest in modern warehouse space in this region. Its large consumer market also contributes to the development of this sector.

In the Tricity region there is 10,000 sq.m of existing space and 35,800 sq.m is under construction (in two parks: Logistic Centre Pruszcz Gdański and ProLogis Park Gdańsk, both investments are located near the Tricity ring-road). In 2006 the demand amounted to 18,000 sq.m. Main tenants include companies from the logistics, food and electronic equipment sectors.

take-up by sector in central Poland

take-up by sector in tricity

central Poland market overview �006



vacancy rate 1.48%

demand 125,000 m2



major landlords IIg, Logistic City, Parkridge*, ProLogis, Slough Estates

central Poland deals �006


Tulipan Park Stryków Corning 48,000 m2

Logistic City ET Euroterminal 21,000 m2

ProLogis Park Piotrków Trybunalski Unilever 10,500 m2

* in February 2007 acquired by ProLogis


industrial

tricity area market overview �006



vacancy rate 0%

demand 18,000 m2



major landlords ProLogis, bIk

tricity area deals �006


ProLogis Park gdańsk C.Hartwig 5,200 m2

ProLogis Park gdańsk Lekkerland 3,700 m2

Centrum Logistyczne Pruszcz gdański nagel 3,600 m2



��


At present, the Polish residential market is booming. As estimated, this tendency is likely to continue further. The key factors strengthening the Polish residential market are the EU accession, the recent increase in the overall standard of living and purchasing power, which, in turn, have led to the growing demand for housing space in Poland. Furthermore, the current mortgage market in Poland is able to provide favourable loan conditions to consumers. The last year uncertainty regarding the VAT rate change has furthered the current demand for residential units. However, due to unfavourable supply side factors, i.e. undecided zoning plans, a lack of vacant plots for residential construction and obsolete legislation on construction works, among others, the supply is not adequate to meet the high level of demand for housing space. Therefore, the Polish residential market is facing a significant shortage of residential dwellings available to be purchased. This has caused a sharp increase in the price level. When compared to the previous year, the price growth in 2006 exceeded 70% in certain Polish cities. The highest average price comprising ca. PLN 7,300 per sq.m is registered in Warsaw, followed by Krakow, Wrocław, Tricity and others. In 2007 the prices of residential units will continue to rise. However, the rate of price growth is expected to slow down.

The Warsaw residential market is experiencing considerable growth in terms of supply and demand for residential space and is treated as an attractive destination for new residential investments. In addition to the aforementioned reasons strengthening the overall Polish residential market, the positive demographic and migratory tendencies are vital components improving the market from the demand side in the Polish capital. As of 2006, approximately 15% of the total number of dwellings procured in Poland were delivered to the Warsaw market. As forecast, the number of procured apartments will permanently grow and is predicted to exceed 21,000 units in Warsaw in the following years. However, such a high level of supply is not likely to meet the demand as around 90-95% of new projects are sold before the completion date. Warsaw is a market of all kinds of housing units (popular, up-graded, apartments and tenement houses). However, despite the rapid development of the apartment segment, the Polish capital city is not satisfied with the number of luxury developments, as, in general, housing units of the higher (but not luxury) standards are procured. Apartments are usually delivered in the developer finishing standard, while the fit-out services are considered by developers as an extra selling point.

Residential markets of other main Polish cities, in particular, Krakow, Wrocław, Tricity, Poznań and Łódź are developing rapidly in terms of the number of housing dwellings delivered and their standards. In the forthcoming years the demand and the price level on these markets are expected to grow further.


city supply supply of luxury developments demand Price levels

Poland h h h h

Warsaw h h h h

krakow h h h h

Wrocław h h h h

Tricity h h h h

Poznań h h h h

Łódź h h h h


m-invest, kordylewskiego apartments, krakow

residential

supply and demand levels on the warsaw residential market

��


contacts:

richard Petersen

Managing Partner

Cushman & Wakefield Polska Sp. z o.o.

michael atwell

Partner, Head of Capital Markets group

E-mail: [email protected]

Mobile: +48 601 334 630

richard aboo

Partner, Head of Office


Mobile: +48 601 357 086

Piotr kaszyński

Partner, Head of Retail


Mobile: +48 601 212 047

tomasz olszewski

Associate, Head of Industrial


Mobile: +48 607 550 225


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servicescontacts:

anna kwiatkowska

Head of Residential


Mobile: +48 605 324 637

david Jones

Associate, Head of Advisory Services


Mobile: +48 607 551 004

kevin craighead

Associate, Head of CEE Property Management


Mobile: +48 601 350 229

michał skaliński

Head of Property Management


Mobile: +48 605 324 638

tomasz daniecki

Head of Project Management


Mobile: +48 603 068 307

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aGency

Our experience and in-depth knowledge of the local market allow our leasing team to advise and find the best tenant mix, tailored specifically for each facility, guaranteeing long-term profits. Thorough knowledge considering rent rates enables our specialists to prepare estimated profits prediction. Working with Cushman & Wakefield will allow you to be connected with the right partners and armed with a complete knowledge of the market to achieve the best results.

develoPment consultancy

At the stage of product development Cushman & Wakefield specialists offer a wide range of services from preliminary market research, site selection, to valuation and acquisition. We are well placed to guide you in the obtaining of building permissions, design consultancy and project management.

valuation

Valuations assist clients in identifying the current value of their real estate assets. As well as being used for balance sheet, taxation, finance, loan and restructuring purposes, it is frequently adopted as a management tool in assessing return on assets and as a benchmark against which to judge performance. We provide valuations for all types of commercial property and facilities, from individual units to extensive global portfolios. Our ability to offer market based valuation assignments by qualified and experienced professionals is based on our day-to-day market involvement in transactions across all sectors. Our advisory services include analysis of investment profitability, financial projects feasibility, complex real estate valuation, valuation for financial purposes, balance sheet valuation, valuation of real estate portfolio and consultancy in terms of real estate acquisition.

ProPerty manaGement

Effective property management services include guidance at all stages from facility designing, construction to tenancy. Our consultancy allows the investor to optimize expenses in the initial phase of investment process, reduce the costs and maximise the investment value. Providing administration, lease, financial management, operational management and reporting services we efficiently relieve property owners of the day-to-day responsibilities of the operation and management of investment properties and maximise the asset value of their investments.

our services

researcH & consultancy

We recognise that research is vital in helping our clients to achieve their goals and to help us provide value across the real estate spectrum. To assist our clients in measuring and evaluating market conditions, which impact on real estate, we seek to provide value-added advice. Through research and the application of proprietary analytical methods to quantify risks and rewards, we help to identify the challenges and opportunities presented by changing business cycles and market conditions and to systematically consider changes occurring in the real estate market. On request we perform forecasts, market analyses and research concerning entering a market, investment strategies, competition analyses, demographical analyses, market research and site selection consultancy.

tenant rePresentation

Our integrated resources help tenants meet their objectives in major markets and locations. Services for relocations, consolidations, subleases, acquisitions and disposals include strategic planning, demographic and site consulting, comparative financial analysis, construction and post-occupancy services.

investment services

Due to our long-standing experience in the real estate investment market, Cushman & Wakefield can efficiently and effectively execute the sale or purchase of a property irrespective of its size, type and location. We offer a full range of services relating to the sale of a property from the preparing of brochures and investment memorandum, running of the marketing campaign and presenting the offer to appropriate investors, analysis of submitted offers to the final negotiations and due diligence process. On the acquisition side, we represent investors in the purchase of a property from the preparing of a letter of intent, negotiation of purchase conditions, strategy, price level, co-ordination of the due diligence and data analysis determining the conditions of the contract of sale.

Financial services

We prepare the most efficient transaction structuring and financing arrangements to meet our clients needs. We act as agents in the acquisition of finance for existing and realized projects. We also prepare complete credit applications covering a full business plan of the enterprise and all the required market analyses. In addition, we will negotiate the most favourable financing conditions, advise on the best choice of offer and give advice during the negotiations of contracts.


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www.cushmanwakefield.com

Cushman & Wakefield Polska Sp. z o.o.Metropolitan, Plac Pi łsudskiego 1 00-078 Warsaw, Poland +48 (0) 22 820 20 20 Tel +48 (0) 22 820 20 21 Faxinfo.poland @eur.cushwake.com

Marketbeat Poland – Spring 2007 - Ticaret Mark… · Office yields in Poland have been falling...

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Transcript of Marketbeat Poland – Spring 2007 - Ticaret Mark… · Office yields in Poland have been falling...