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CBRE summarizes 25 years of the Polish office market

The first modern office buildings started to be constructed in Warsaw in the early 90s. However, for the real estate companies and their databases, it was LIM Center (i.e. the Marriott Hotel building) built in 1989 that started the high-rise office-building era in Poland. Throughout the past 25 years, 951 office buildings with a total area of 7 million sqm were built.

“Within the past 25 years, 430 modern office buildings with a total area of 4.2 million sqm were constructed in Warsaw. Previously existing office buildings such as Universal (which was built between 1964 and 1965) or Intraco, which was delivered ten years later, offered a relatively low standard. Buildings developed throughout all these years in Warsaw brought various standards and functions,” said Joanna Mroczek, Director of Research and Consultancy at CBRE.

Between 1990 and 2000, we witnessed the construction of buildings such as: Atrium (the first phase of developing the frontage of Al. Jana Pawła II), Galaxy (the first building in the Empark complex – the former Mokotow Business Park in ul. Domaniewska), or the first high-rises such as Orco Tower, Ilmet (both delivered in 1996) or Warsaw Financial Center, which was constructed in 1998 and still enjoys a well-deserved reputation. Apart from office buildings situated in the centre of Warsaw, there were also the first-in-Poland business parks. These include, among others, Wisniowy Business Park, Jerozolimskie Business Park, Ochota Office Park or University Business Center. In the years 1990-2000, 153 buildings with a total area of 1.44 million sqm were constructed in Warsaw. In 2000, over 400,000 sqm were delivered in Warsaw, which to this day remains the record-breaking supply delivery.

In the early 90s, the highest recorded rents reached USD 50 per a sqm a month, while the vacancy rate remained below 2 percent.

The period between 2000 and 2010 was a time of the most dynamic growth in the office market in Warsaw, but also the time of the crisis. In that decade, 208 office buildings with a total area of nearly 2 million sqm were delivered. In year 2000 the highest office building in Warsaw, Warsaw Trade Tower, was completed as well as the current CBRE Headquarters – Rondo 1 (2006).

The Warsaw real estate market has changed significantly within the past two decades. In the early 90s, the supply of new office space covered the take-up and the vacancy rate did not exceed 3 percent. Most office assets were able to find tenants even before commissioning or soon after completion. Since 1998, a rapid growth of modern office space supply could be observed which, together with a deficiency of demand, resulted in an increase of the vacancy rate.

Since the early 90s, when first modern commercial assets hit the market, the real estate industry has undergone many stages of development. There were the years of prosperity and the years of crisis – particularly the years 1999-2001 and 2009-2011, which can be considered as the most difficult ones for developers and property owners.

In the next three years, a relatively large number of new office buildings will be delivered in the centre of Warsaw. Most of them will be located in the area of the new underground line, which is currently under construction. It is expected that between 2014 and 2016 over 350,000 sqm of office space will be delivered in central locations, with over 600,000 sqm to be constructed all over Warsaw.

“The demand for office space is shaped mostly by foreign businesses which are looking for larger premises, consolidate their branches, diversify their activities region-wise and enter the Polish market looking for highly skilled employees. Polish businesses, banks or insurance companies in particular, usually decide to build their own seats or lease space in co-owned buildings,” said Łukasz Kałędkiewicz, Senior Director at CBRE Office Agency.

The history of the Polish office market might have started in Warsaw, but modern assets started being developed in other cities as well. Poland’s accession to the European Union opened the market for BPO / SSC companies, which resulted in rapid growth of the office market outside Warsaw. Even today regional cities in Poland are a very attractive location for companies operating in the outsourcing sector because of the factors such as high availability of skilled workforce, improving investment climate and the development of the road infrastructure, which was possible, among others, thanks to funding from the European Union.

The first modern office building to be developed out of Warsaw was PAZIM, built in Szczecin in 1992. In the mid 90s, the first modern assets began to appear in Poznan, Katowice, Tri-City, Wroclaw or Lodz.

Currently, the largest concentration of office buildings apart from Warsaw can be seen in Krakow – 102 assets (with a total area of 628,000 sqm, Wroclaw – 100 buildings (total area of 551,000 sqm), Tri-City – 80 buildings (total area of 455,000 sqm), Katowice – 51 buildings (total area of 317,000 sqm), Poznan – 55 buildings (total area of 303,000 sqm) or Lodz – 58 buildings (total area of 297,000 sqm).

The Polish office market, particularly Warsaw, can arguably boast the strongest position among the former Eastern block countries. Thanks to a stable economy and political situation, Poland is perceived as an attractive market for both investors and foreign businesses entering the market.

Currently, there are over 1.2 million sqm of office space under construction, out of which over 50 percent are located in the capital. This means that when the currently developed space is completed, the office space stock in the largest Polish cities will increase by over 17 percent.

Wiktor Doktór, President of Pro Progressio Foundation, commented on 25 years of the Polish office market: “We are used to the fact that major Polish agglomerations are developing fast and foreign investments are growing like mushrooms after the rain in Warsaw, Krakow, or Tri-City. Will the future bring further development of large urban centres, or maybe it is the time for smaller cities? Which of them have the opportunity to develop and in what direction? Looking at the portfolio of foreign investments, which entered Poland within the past months, and those that are about to show up and at the dynamic activities of investor service centres in Polish cities, it is safe to assume that there is an interesting time ahead. It will be a period of changes, growth and new stars emerging in regional markets.”

25 years of the polish office market in numbers:

 The highest office building (Warsaw Trade Tower – 208 m with the pinnacle)
 The largest office building – Rondo 1 – 57,000 sqm GLA
 The largest office complex – Empark – 107,000 sqm GLA
 The highest rent – USD 50-60 – early 90s – Centrum LIM
 The highest vacancy rate – 25 percent in Lodz (2009)
 The most expensive office building (investment sales) – Rondo 1 sold for €297 million in 2014
 The largest floor space in an office building – Konstruktorska Business Centre in Warsaw – 7,341 sqm.
 The largest amount of office space delivered in a single year in one city – 427,000 sqm in Warsaw (2000)
 The largest amount of office space leased in a single year in one city – 107,000 sqm in Krakow (2012)
 The biggest lease agreement in Poland – 43,700 sqm. Orange in Miasteczko Orange in Warsaw (43,700 sqm).

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