Year of the Developer

The vacancy rate, which was predicted to fall in 2006, did indeed drop; and what was to have risen – rents – at least started moving. In line with earlier expectations, it has been a fantastic year on the office market.

Research done by the Warsaw Research Forum indicates that 186,300 sqm was rented in Warsaw centre and 225,000 sqm outside the centre, which gives a total of 412,200 sqm. By comparison, 2005 closed with a result around 40,000 sqm worse than in 2006.

Twenty-one office buildings with a combined total area of 186,700 sqm were completed in the past 12 months. The largest debuts were: Rondo 1 (55,000 sqm) from Hochtief Project Development Polska on Rondo ONZ, and two investments by Ghelamco of Belgium – Prosta Office Centre in the district of Wola (18,600 sqm) and Trinity Park I in the Mokotów district (18,500 sqm). There were also two other Mokotów projects: Cirrus (12,900 sqm) by ECI and Topaz (11,000 sqm) developed by Globe Trade Centre.

The very largest

Rates fall

It was Hochtief’s glass skyscraper which aroused the greatest emotions, changing hands several times. At the end of the day, the shares in the property are now held by the London & Regional fund belonging to brothers Ian and Richard Livingstone and also by Macquarie Global Property Investment. Yields slumped last year and presently stand at around 5.5 pct for the best office buildings.

This office fever is also reflected in rental rates. Office building owners can breathe a sigh of relief after rents soared – especially in recent months.

However, had the opening of Złote Tarasy not been delayed, with its two office buildings (Lumen 23,500 sqm and Tower 21,500 sqm) as well as its shopping section, the situation in the city centre would be quite different. The offices being prepared for ING Real Estate’s investment will finally enter the market  Ghelamco wants to develop the Senator building on ul. Bielańska (around 40–50,000 sqm). Universale International has set its sights on land bordering ul. Marszałkowska and is planning to develop a CBD office building there (around 15,600 sqm), but has yet to be given a building permit. Work on a Wolf Immobilien project designed by the Stefan Kuryłowicz architectural studio has now been put on the backburner. The Wolf Marszałkowska office building (around 11,000 sqm in area) will eventually be located on ul. Marszałkowska near Rondo Dmowskiego.

The surroundings of al. Jerozolimskie, once freed of traffic jams by road improvements, may become the most sought after place for office buildings in the next few years. Karimpol, together with Immoeast, will start work on the group of four Equator office buildings. As will Eurocentrum on the long awaited development of more buildings next to the high-rise Alpha building. Kopernik Office Buildings and Ochota Office Park have also yet to enter their next development stages, while TK Development is still holding a building plot in reserve. The most fascinating rivalry among developers, however, will be waged in the Mokotów district.

Colliers International estimates that half a million sqm of office space will be delivered by developers by around the turn of 2009 in Warsaw alone. Out of that there will be around 90,000 sqm in the city centre, with Mokotów accounting for around 380,000 sqm. The most important investments are: Nefryt (15,000 sqm), Platinum Business Park (45,000 sqm in 5 buildings) by GTC, Horizon Plaza (around 35,000 sqm) – a joint undertaking of Curtis Development and the German IVG Immobilien fund, Marynarska Point (24,000 sqm) from Skanska Property Poland, Marynarska Business Park (45,000 sqm) from Ghelamco, Park Postępu (36,000 sqm) by Echo Investment the Kielce developer and Adgar Plaza (27,000 sqm) at the intersection of ul. Postępu and ul. Marynarska from the Adgar Investment and Development group of Israel.

BPO the deciding factor

Anna Staniszewska emphasises that: “The supply of modern office space including restored apartment-houses in Wrocław will double in the next two or three years. Today it amounts to 160,000 sqm.

Mermaid Properties (previously WWG Management) also feels good business can be done in Łódź and will turn a former Próchnik factory building into modern offices (around 20,000 sqm); GTC is of a similar opinion, being the developer of an office building of 28,000 sqm space on ul. Kościuszki. Katowice is another market on which the company has set its sights. Skanska Property Poland in late 2006 revealed that it had purchased land near ul. Chorzowska, where it says it will develop a project with 30,000 sqm of rentable space in several stages.

In the opinion of Marcin Kania, associate director of Colliers International: “Katowice is a city of great potential though international developers only started exploring the area seriously as late as 2006. Katowice will start reaping profits for the next few years due to what are arguably Poland’s best transport facilities: to the east there is the motorway to Kraków, to the west the Wrocław motorway, to the north the national highway to Łódź and Warsaw and to the south lies the road to Bielsko and Cieszyn. It also boasts a huge market of young, well educated people. The modern office space of 80,000 sqm which it currently possesses is not satisfying tenant demands.”

Players active in the office market have cause to be satisfied with their 2006 results. The last 12 months can safely be called Year of the Developer, since it is they who dictated events. 2007 will surely not give any cause for anxiety due to the rapid growth of the economy. And its seems 2008 will also be an interesting period when we will see who has gained most from the boom.