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Investors look for opportunities in office markets outside Warsaw

Investor interest in office properties in Poland’s largest cities outside Warsaw has increased. Transactions such as the sale of Katowice Business Point project by Ghelamco to Starwood Capital Group announced in August, or the takeover by Octava FIZAN office properties from the portfolio of Arka BZ WBK Property Market Fund in Wroclaw, Poznań, Łódź and Tri-City in H1, confirm the increasing impact that major agglomerations outside the capital city have on the Polish office investment map.

Tomasz Puch, Head of Office and Industrial Capital Markets, JLL, said: “Warsaw is still attracting the majority of investors, and the specific character and the size of this market means that the most spectacular transactions take place there. But since last year we have seen a growing interest from investors in major agglomerations outside the capital city, illustrated by this year’s transactions in Krakow, Wroclaw, Tri-City, Poznań, Łódź and Katowice. This activity has been triggered by several factors. It stems from the fact that Warsaw has become increasingly expensive, and after a number of flagship transactions, few products have remained on sale. Furthermore, this interest is encouraged by the growing maturity of office markets outside the capital city, which, in turn, engenders trust from investors. When Warsaw is taken out of the equation, the most active markets are Wroclaw and Krakow.”

He continued: “Investors are generally on the lookout for prime properties. The growing volume of office investment transactions outside Warsaw is also facilitated by the changing strategies of several local developers. These companies are more open to new solutions, e.g. joint ventures or sharing a part of the developer’s profit. Some owners are ready to renegotiate and extend lease agreements in order to make their projects more attractive and valuable.”

According to JLL data, in H1 investment volume for major office markets outside Warsaw amounted to ca. €220 million (the total including Warsaw totalled ca. €750 million in H1). The largest office transaction outside Warsaw in H1 was the sale of office properties from the portfolio of Arka BZ WBK Property Market Fund, including Quattro Forum in Wroclaw, Winogrady Business Center in Poznań, Red Tower in Łódź and Alfa Plaza in Tri-City to Octava FIZAN. The second largest transaction this year (and the largest single transaction) was the sale of Lubicz Office Centre by Peakside to Griffin Group. Another very significant transaction was the sale of Wroclaw office building Green Day from Skanska to GLL.

The largest office transaction in the last 10 years outside Warsaw was the sale of the Bema Plaza project by Ghelamco to Deka Immobilien for over €100 million in 2008 (Wroclaw) but considering the deals in the pipeline this record may be broken this year.

“Taking into consideration deals in the pipeline, we expect that the total office investment volume outside Warsaw may hit €400 million by the end of 2014, beating €156 million in 2013 and record €346 million achieved in pre-crisis 2006. Moreover, investor activity is going to continue in Q1 2015, with significant transactions expected in Wroclaw or Tri-City,” Tomasz Puch concluded.

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