Commercial real estate market in Poland remains stable across most sectors

Summary:According to Marketbeat Poland – Spring 2013 report from Cushman & Wakefield, a leading global real estate services firm, last year’s office leasing volume shows the office market picking up momentum, gaining in importance relative to other property sectors. The retail market slowed compared with previous years. 2012 was the best year ever for the warehouse investment market.

“Marketbeat Poland – Spring 2013” presents a summary analysis of the Polish office, retail and warehouse markets in 2012, with forecasts for the near future.


Commercial investment market:

  • Investment transaction volume hit a record EUR 2.8bn (the best result since 2007 and the third consecutive year of growth)
  • This total accounted for 75% of Central Europe’s annual volume
  • Investment warehouse transaction volume rose by more than 180% year on year

Office sector:

  • Another year of record volume of lease transaction (960,000 sq m)
  • Office supply more than doubled compared with 2011 and reached 509,000 sq m at year-end 2012
  • The largest project completed in 2012 was Skanska’s Green Corner (24,500 sq m) and the largest deal was T-Mobile’s lease of 27,000 sq m in Ghelamco’s Marynarska 12 complex (currently under construction)
  • Krakow remains the largest and Wroclaw the fastest-growing regional office market

Retail sector:

  • The retail market in Poland is reaching saturation and its growth is slower compared with previous years
  • The biggest retail schemes to open in 2012 were Korona Kielce, NoVa Park Gorzów Wielkopolski and Galeria Rzeszów
  • Rents remained stable

Warehouse sector:

  • More than 500,000 sq m of warehouse space came on the Polish market in 2012
  • Take-up fell and stood at more than 1,500,000 sq m
  • Rents remained flat or edged down slightly

„Despite the backdrop of slowing economic growth in Poland, activity in the commercial investment market in 2012 was robust. The Polish investment market’s strengths are its stability and low liquidity risk. Transaction volume hit a record EUR 2.8bn during the year, the best result since 2007. It is worth mentioning that this total accounted for 75% of Central Europe’s annual volume,” says Wojciech Pisz, head of Capital Markets Group of Cushman & Wakefield.

Investment market

In line with previous years, retail and offices were the best-performing sectors with volumes of EUR 1.15bn and EUR 1.09bn respectively. Warehouses were the fastest-growing sector, with a transaction volume up by more than 180% year on year to hit EUR 462m in 2012, the busiest year ever, mainly a result of Prologis’ and Panattoni’s decision to liquidate a significant part of their completed and leased warehouse parks.

Warsaw continued to dominate office investment market, accounting for 97.7% of total transaction volume. The largest deal in 2012 was Pramerica’s and CA Immo’s sale of the Warsaw Financial Center for EUR 210m to a jv comprising Allianz and Tristan Capital Partners. Retail investment volume remained roughly on par with the previous year. The market was characterised by fewer, bigger transactions. Two large transactions – Unibail-Rodamco’s acquisition of Złote Tarasy in Warsaw and German fund Union Investment’s purchase of Manufaktura in Łódź for EUR 390m – accounted for 60% of the total volume.

“Forecasts for 2013 show that the volume and pattern of commercial property investment will be similar to those for 2012. Investor demand for Polish commercial properties is expected to remain at its current level, with prime assets remaining the focal point. Their supply will be the main factor in determining the market’s performance. With economic revival forecast for the second half of the year, interest in opportunistic assets is also likely to grow,” adds Wojciech Pisz, head of Capital Markets Group of Cushman & Wakefield.

Office sector

Office supply more than doubled from 218,000 sq m at year-end 2011 to 509,000 sq m at year-end 2012. Warsaw made up over 50% of the total. Large regional cities, especially Wrocław, Krakow and Poznań, attracted increasing interest from developers. 24 schemes were delivered to the Warsaw market, bringing the total office stock in the capital to 3,859,000 sq m. By comparison, Berlin has more than 17 million sq m of office space and Prague close to 3 million sq m. A total of 540,000 sq m of office space is under construction in Warsaw and a further 620,000 sq m is in the pipeline for delivery by the end of 2015.

Leasing volume in Poland in 2012 exceeded 960,000 sq m, with Warsaw accounting for approx. two-thirds of the total (607,000 sq m). Total leasing activity in 2012 rose by around 4% on the previous year. The largest deal in 2012 was T-Mobile’s lease of 27,000 sq m in Ghelamco’s Marynarska 12 complex, which is currently under construction.

Among the regional cities Krakow remains the largest office market with the total stock standing at 602,350 sq m. Wroclaw attracts the biggest interest from developers, with 66,000 sq m of office space coming on to the market last year. This strong development activity is expected to continue in 2013.

The biggest vacancy declines were noted in Katowice, with a 4.6 percentage point drop, and Krakow with a 4.4 percentage point drop compared with the end of 2011, while Poznań and Wrocław had more space available (a rise of 4.1 and 3.4 percentage points, respectively). The capital also posted an increase in vacancy to 9% at the end of 2012. Modern office buildings in the Warsaw’s centre command EUR 22–26.5/sq m/month, outside the city centre EUR 14–16.5/sq m/month. Rents in other cities range between EUR 12–16/sq m/month.

“In most locations, headline rents remained stable, but with growing competition among developers and growing pressure on operating expenditures, tenants expect more favourable lease terms, which will impact in lower effective rental rates,” says Richard Aboo, Partner, head of office department of Cushman & Wakefield.

Retail sector

Retail supply in Poland in 2012 totalled 550,000 sq m of GLA, increasing the country’s total floorspace to 11 million sq m. The biggest retail schemes to open in the first half of the year were Korona Kielce and NoVa Park in Gorzów Wielkopolski, while during the second half the biggest addition was Galeria Rzeszów. Development focused on smaller retail facilities in small and medium-sized cities. New shopping centres were delivered, among others, in Grudziądz (Alfa Centre), Bełchatów (Galeria Olimpia), Ciechanów (Marcredo Center), Starachowice (Galeria Kamienna), Kędzierzyn-Koźle (Odrzańskie Ogrody) and Sieradz (Dekada). Two factory outlet centres came on to the market in Szczecin and Łódź. In 2013 new shopping centres will open mainly in large conurbations.

A key event on the retail market was French hypermarket chain Auchan’s acquisition of Real hypermarkets.

Vacancy rates in Poland range between 1.5% and 5%. Rents are expected to stabilise in the near future. Prime centers will continue to command the highest rates at EUR 75–85/sq m/month.

„Poland’s retail market slowed compared with previous years. With worsening economic conditions, tenants are increasingly seeking ways to lower their occupancy costs. A number of retail chains have attained their target in terms of market share and are now slowing their expansion. Many are reconfiguring their store portfolios to favour successful, high-turnover centres. Poland’s retail supply pipeline with delivery for 2013 is expected to reach 750,000 sq m GLA. These include Atrium Felicity Lublin, Galeria Katowicka, Galeria Bronowice Krakow, Poznań City Center, Wzgórze Gdynia (phase II). Shopping centre developers aim for quality over quantity and will opt for refurbishment and extensions. They have spotted new retail opportunities in transport hubs, sites near motorway junctions, undeveloped land in city centres and sites in developing residential areas,” – says Katarzyna Michnikowska, senior consultant of Valuation & Advisory at Cushman & Wakefield.

Warehouse sector

More than 500,000 sq m of warehouse space came on the Polish market in 2012, bringing the country’s total stock to 7,530,000 sq m. At year-end 2012 around 200,000 sq m of warehouse space was under construction. Warsaw remains the largest warehouse market in Poland, accounting for 36% of total stock. The largest regional markets are: Upper Silesia, Poznań, Central Poland and Wrocław. The highest vacancy rate is recorded in Lublin (37%), Szczecin (36%) and Rzeszów (30%), resulting from a very limited amount of stock.

The majority of new space which was delivered was already leased at handover. Modern warehouse take-up in 2012 stood at more than 1,500,000 sq m. Transaction volume decreased by approximately 17% in comparison to 2011. Take-up predominantly came from logistics operators (40%). The vacancy rate fell to 10.7%. Rents remained flat or edged down slightly. The highest headline rents were in Warsaw inner city (EUR 4.5–5.8 per sq m per month), with the lowest in Central Poland and in the Warsaw suburbs (EUR 2.4–4 per sq m per month).

„In 2012 improving road infrastructure has facilitated the development of other regions in particular: Tricity, Krakow, Rzeszow, Toruń, Szczecin and Lublin. Further improvement in Poland’s transport infrastructure, the rise of e-tailing and the development of new industrial plants in special economic zones should generate demand for modern warehouse space,” says Tom Listowski, Partner, Head of Industrial in Poland & CEE Corporate Relations at Cushman & Wakefield.

Author: Cushman & Wakefield Publication date: 2013-03-01 Price: 0