Thanks to a well-developed telecoms and transport infrastructure, an excellent location and broad availability of an efficient, skilled, and relatively low-cost workforce, Poland will continue to attract foreign investors with plenty of business opportunities. Warsaw will remain the top investment destination in the region.
According to Marketbeat Poland – Autumn 2015 report from Cushman & Wakefield, a leading global real estate services company, the investment volume in the first half of this year reached €794m, of which the office sector accounted for 47%, followed by retail with 34%, the industrial and warehouse sector taking around 19%. However, compared with the same period last year, the investment volume decreased by 47% and the number of deals was down by 16%. But the experts say this situation is temporary as Poland is becoming increasingly popular among international investors, who not only move here their regional offices, but also BPO/SSC centres that used to be located in such outsourcing heavyweights as Vietnam, China or India. In result, in the coming years we will still be observing the launch of many interesting and high-quality projects in each of the three commercial real estate sectors.
Office sector – high demand, high supply and high vacancy rate
In the course of 2015, we have recorded strong activity of developers in Warsaw and in regional cities. In Q1 across the whole Poland there was almost 1.4 million m² of office space under construction. In Warsaw alone, 240,000 m² of new office space was completed during the first three quarters of this year. As Cushman & Wakefield reports, by the end of this year and additional 80,000 m² are scheduled for delivery. This means that the annual volume of supply in 2015 may reach 320,000 m² – the highest recorded since 2001.
From the very beginning of this year, the demand for office space was very strong, reflected in the record-breaking volumes of take-up and net absorption. As a result, the vacancy rate dropped from 14.1% at the end of Q2 2015 to12.9% which is the lowest value recorded on the market since Q1 2014. The positive sentiment in the leasing market is expected to continue into 2016, in line with the economic cycle, strongly spurred by the expiry of ten-year leases signed in 2006-2008 and five-year leases signed in 2011-2013.
However, despite the relatively high leasing activity, the large number of office buildings coming on stream in the nearest months will lead to a rapid rise in vacancies that in 2016 may amount even to 17-20%. The increasing supply of new office space and the rising vacancy rate once again have put tenants in a comfortable position, at the same time enforcing more flexibility from developers. Companies looking for office space are getting more and more demanding. In the light of this trend, only developers who will adequately analyse the market and manage to adapt appropriately their offer to tenants’ demand will succeed in 2016.
Robust development of logistic and warehousing sector
2015 was a good year in the logistics & warehouse space real estate sector in Poland. In the course of the first three quarters of this year, more than 839,000 m² was delivered to the market. In result, by the end of Q3 the existing modern warehouse space stock in Poland amounted to over 9.6 million m², what ranks Poland as ninth in Europe.
Since the beginning of the year, gross demand for warehouse space in Poland amounted to 1.6 million m², which pushed the vacancy rate down from 6.8% to 6.5%. The developers’ activity remains very strong – currently there are nearly 663,000 m² of warehouse space under construction, part of which will be delivered by the end of this year. According to the Cushman & Wakefield report, in 2015 Poland’s new supply is likely to exceed 1 million m² and most schemes are either build-to-suit (BTS) projects or have secured substantial pre-lets.
Although the Warsaw region still remains the largest warehouse market in Poland, huge investments in transport infrastructure have spurred development activity in the regional markets such as Upper Silesia, Central Poland, Poznań, and Wrocław whose industrial space accounts for 60% of the country’s total market share compared to Warsaw’s 31%.
Retail needs more space
Just as the office and warehouse sectors are looking healthy, so the Polish retail market can also consider the year 2015 a success. According to data from Jones Lang LaSalle, at the end of September 2015 total modern retail stock in Poland increased to 12.58 million m².
Cushman & Wakefield reports that in the first half of 2015 over 176,000 m² of modern retail space was delivered to the Polish market. Further 800,000 m² is now under construction with about 439,000 m² to be delivered this year. This means that the total supply of retail space in 2015 will amount to 616,000 m², and will be 30% higher that the supply recorded in 2014.
In recent months, demand for modern retail space has remained at a stable level across the major Polish cities. The most successful were high-profile schemes with a large number of visitors and satisfactory revenues. However, schemes located within the existing retail projects that have been recently redeveloped, refurbished or re-commercialised are also getting increasingly popular.
Year by year the Polish retail market is showing the need to develop new formats. Therefore in the coming months we will experience the implementation of specialised projects, including exclusive shops designed for premium brands, convenience shopping centres, strip malls or retail streets.