Desperately Seeking Small Spaces at Low Rents

Clients looking for smaller and cheaper space outside the city centre, relatively stable rents
and local developers building small office buildings: announcements in Gdańsk and quite a few investments in Poznań. This just about sums up the office space market in Poland's largest cities over the past half-year.

Kraków
Rafał Oprocha,
CB Richard Ellis:
For the last three months there has been increasing activity on the Kraków market, with occupancy rates increasing steadily. We have 62,000 sqm. of modern office space in Kraków, 26-27 percent of which, does not have tenants. Compared to last year, the index has decreased by 3-4 percent. Most of the modern office space is leased at 80-90 percent, and the high vacancy rate is attributable to just one building, which is only half-leased.
Although few major transactions have been agreed in Kraków in the last half-year, I am expecting a number of big leases in the coming months.  Transactions from the last six months have involved mainly hi tech, insurance and financial companies, and the space in question was from 200 to 1600 sqm.
Construction of several office buildings is in progress, which include: Galileo of GTC, Nowa Kamienica of Waypoint and that of Azbud. They will add 17,000 sqm. of modern space to Kraków next year. This year, one investment,  KBP's   9500 sqm. office building in Zabierzów near Kraków - is scheduled for completion.
During the last 6 months rents have remained at the stable level of USD 17-19 /sqm.

Łódź
Katarzyna Kubicka,
Echo Investment S.A.:
 There are no new developments to report in Łódź over the last six months, and no important leases have been agreed either. Due to Warsaw's  proximity, the average space leased here is much smaller than in the capital: 200 sqm.  and many customers rent only several dozen sqm. Rents are quite stable and  long-term tenants are the norm.
The most popular way to acquire office space here is to purchase and modernise   tenement blocks,  usually in  ul. Piotrkowska,  ul. Mickiewicza or   ul. Kilińskiego.
In spring this year, Echo bought the 12,000-sqm. Orion office building from Pekao Development, which is now being modernised. Thirty percent of this space has been leased and the latest tenants are Softbank Serwis, (300 sqm) and Kaczmarski Inkasso (100 sqm). At Centrum Biznesu (the Business Centre) in Łódź (6,000 sqm.), 33 percent of  the space is vacant.
nIn March, the company Efecta started construction of a small office building, similar in style to the tenement block on the corner of ul. Piotrkowska and ul. Żwirki.

Katowice
Wojciech Kopeć,
Biuro Obrotu
Nieruchomościami AS:
The market is at a standstill. There is a lot of space on offer, especially in older buildings, but no demand for it and much  has  been vacant for a long time now. The biggest order we have received this year has been for 400 sqm., and customers are usually looking for offices of 20-30 sqm. Prices have varied from PLN 20 to PLN 60 per sqm., in the outskirts of the city to PLN 45-70 in the centre. Tenants are moving out from the centre where most office buildings are, (the latest one is Uni Centrum, where work is to be completed summer this year), usually to the eastern suburbs (Piotrowice, Brynów) where they refurbish buildings for office purposes.
Some major real estate agencies have gone bankrupt because of the downturn in business.
nOne of the biggest transactions this year was the lease of a 1,000-sqm. office building in ul. Teatralna  by ZUS for about PLN 35 / sqm.

Wrocław
Teresa Surma, Wrocławska Giełda Nieruchomości:
Quite a lot of office space has been added in the last half-year. 2,000 sqm. of A class space was leased at Galeria Dominikańska, another 750 sqm.  became available in Solny Square, (our company is the exclusive agent for this space) and the ZECO building is now ready in ul. Krakowska with  400 sqm. to let. Despite this, the first quarter was characterised by a slowdown. Although customers showed interest in the available space, few leases were agreed, though one came to over 800 sqm., for a private clinic. The Korean company Inside TNC's lease of 105 sqm for PLN 38 / sqm. net, was one of a number of smaller leases signed. I noticed much more activity in the market in the second quarter of the year.
Last year the rents for office space fell to EURO 12-13 / sqm. for the highest standard offices and EURO 5-6 / sqm. for the lower standard. In the last half-year, rents remained stable.

Tri-City
Anna Thomas,
Ober Haus:
At the beginning of this year, the company Vigo completed an office building in Gdańsk. The building contains 7,000 sqm. for sale and lease  in an A class development. Its main tenants include Hempel, Ergo Hestia, and Dresner Bank Polska.
There is great interest among tenants, in older developments situated in the very centre of the city, such as Zieleniak, (11,000 sqm. of space, currently leasing 85%), and the former building of Prorem (7,000 sqm. of office space for lease, currently leasing 80%).
 Local companies are mostly interested in modules from 30 to 120 sqm and tenants are often satisfied with older offices of a lower standard, (situated in city centres), in tenement blocks adapted for office purposes, which are leased for USD 6 to 8 per sqm.
Landlords often lower rents as far as of USD 12 - 16 / sqm., which is often the profitability threshold. Leases are usually concluded for no more than three to five years.
nING Real Estate has announced its plan to build 23,000 sqm. of office space at the complex in Targ Rakowy
nMennica Invest and WSC Investment have announced their plans concerning Wyspa Spichrzów. This investment, worth EURO 130-150 million, will contain offices and other premises.

Poznań
Małgorzata Wojtoń,
DTZ:
We have recently experienced a decrease in rents, but not as significantly as in Warsaw. We have several big buildings of the highest standard in Poznań, where prices are similar to the capital city. They include Poznańskie Centrum Biznesu [the Poznań Business Centre] (12,5 percent vacancy rates), Poznańskie Centrum Finansowe [the Poznań Financial Centre] (15 percent vacancy rates) and Dwór Hamburski. The starting rent in these properties is about USD 28 / sqm. Other modern buildings offer rents starting from USD 20 / sqm. At the Kupiec Poznański office and retail development which opened last year, several banks (BPH-PBK, BNP Paribas) have leased  1400 sqm., together.
Small local developers, are also doing quite well, as they are more flexible in negotiations concerning the rent and duration of the lease. Hestia  recently leased 900 sqm. at Futura Office (1800 sqm.). nBZ WBK has leased 9,000 sqm. at PCF
nKuball&Partner have started construction of an office building in ul. Marcinkowskiego, which will have 5,000 sqm. for offices and services,
nIn March Automobilklub Wielkopolski and Ataner,  started construction of the eleven-storey, Delta office building. The development is scheduled for completion one year from now.
nWork at the construction site of Andersia Property was scheduled to start at the beginning of the summer.  The Von der Heyden Group and the local authority are building a 23-storey building. Offices will occupy 9,500 sqm. in 8 storeys,
nConstruction of the 12-storey PGK office building, (with 14,500 sqm. office space) has begun. The building, whose agent is Golub, is scheduled for completion in March 2003. z