Not quite the ugly duckling

Having once been the capital of Poland, Kraków still enjoys the reputation of being a most impressive and beautiful city – but perhaps its Podgórze district has not always shared in this renown. For many years the district was the home of the State Chemical Fertilisers Factory, which finally closed down in 2003 leaving behind a rather unsightly 19 ha brownfield site. But despite its unattractiveness, this site always had huge potential – and we all know how ugly ducklings can turn into swans. It was TriGranit that took up the challenge in 2006 of revitalising the property, eventually turning it into the Bonarka shopping and office complex.

TriGranit is a company that loves inner city mixed-use developments, where whole rundown areas can become a new district for the local community. By having different facilities with different functions that complement each other a real, living district can be created. For example, in 2005 it redeveloped a site in Katowice and created the multifunctional Silesia City Center. In Kraków, TriGranit planned two separate but interdependent projects for the Podgórze site: the Bonarka Shopping Centre and the Bonarka for Business (B4B) office park. The 92,300 sqm mall was sold to Rockcastle in 2016 for around EUR 361 mln – the Polish real estate market’s largest single asset transaction of 2016. After having made the area more friendly for the local residents, TriGranit then began work on its B4B office park project. The first stage of the development comprised four buildings (A, B, C and D) designed by Artur Jasiński i Wspólnicy and offers altogether around 35,000 sqm gla. Buildings A and B were completed in 2011 and were soon followed by buildings C in 2012 and D in 2013. For the second stage of the office project, TriGranit began to work with IMB Asymetria together with Biuro Rozwoju Krakowa on the other buildings. Building E was completed in Q1 2015, Building F in Q3 2016 and building G has just recently received its occupancy permit. Each of the buildings of the second phase comprises 10,000 sqm gla on eight storeys. The entire second stage is BREEAM certified with a ‘Very Good’ rating.

Filling up fast

B4B has always been very popular among tenants. The scope for expanding the complex and offering current tenants more office space tailored to their needs is one of the strengths of B4B, along with its functionality and convenient location. TriGranit was able to announce that building E had filled up last July. The final two tenants to enter the building were consultancy Gerda Broker and IT provider Skelia. Other companies that had already leased space in the building included electric utilities company Innogy (previous RWE), payment processing company VSoft, Berner and IT provider Solarwinds. TriGranit also announced that building F was 50 pct leased last May, after signing a lease with IT provider Luxoft for 2,500 sqm on two floors. Luxoft shares the building with Global Logic, which also leases around 2,500 sqm. But if anyone’s looking for space in the final building of the second stage, tough luck – it’s all gone. The next addition, building G, will be ready in early 2017. It is already 100 pct leased by Euroclear, which currently operates in building C. But the good news is that there are still free spaces in Building F of B4B. Unsurprisingly, the development has scooped up numerous awards, such as the ‘Krakow – My Home 2014’ prize, the ‘artURBANICA 2012’ award for architecture and public areas, and the ‘Prime Property Prize Małopolska 2013’ in the office building category.

So far over 65,000 sqm gla has been developed in the park, which houses such tenants as Alexander Mann Solutions, State Street, Herbalife, Pegasystems, Pure Jatomi Fitness and Lufthansa Global Business Services. Eventually ten buildings are planned containing a total of around 95,000 sqm gla in an overall investment estimated at EUR 200 mln. The next stage is also to be BREEAM certified at the ‘Very Good’ level, with Sweco Consulting acting as the green assessor. All that remains of the former cement plant is a chimney, now been transformed into an architectural feature.

Busy 2017 begin in B4B, relocations, new leases...

2017 began extremely actively for B4B in terms of new lease agreements and renewals. Pegasystems is to relocate its premises from Building A to Building C, enlarging its office space by almost 4,000 sqm gla. In addition, new office lease agreements and renewals for 2,550 sqm gla have been signed with four tenants so far this year.

The place to be

But what’s so special about the Kraków market? Kraków is Poland’s second city in terms of business activity and was last year ranked for third time in a row as Europe’s top outsourcing destination in Tholon’s ‘Top 100 Cities’ index. It offers many advantages to companies that feel they don’t need to base their operations in Warsaw, including a highly skilled workforce as a result of the city being the home of one of Poland’s top universities. Clearly the atmosphere on this market is as vibrant as the city itself – Kraków’s modern office stock could reach as much as 1 mln sqm by the end of this year, representing an increase of around 200,000 sqm on the current levels. But it is not just the supply that’s increasing. In the first three quarters of 2016, the demand for office space rose by as much as 70 pct to 150,000 sqm gross, according to figures published by Colliers International in its ‘Kraków Office Market November 2016’ report. Around 80 pct of this demand came from the IT sector. Throughout 2016, the city’s vacancy rate was around 6–7 pct, although Colliers does not expect this figure to rise due to the substantial amount of office space that is about to hit the market. Moreover, the city still remains very attractive to the business servicing sector, from which there seems to be an ever-increasing number of companies coming onto the market. Colliers says that around 50 pct of the shared service centres in the city have been set up within the last five years and that the rate is continuing to accelerate. Indeed, Colliers had no doubt in its report that this solid growth would continue at least until 2020.

Obviously this is the kind of market that a company like TriGranit cannot ignore, because although the developer is only twenty years old, it has already established itself as one of the most important players on the CEE market. And now, bolstered by the financial muscle of US-based TPG Real Estate, which bought the company in 2015, there seems little that this Hungarian-based developer cannot do. Poland, as the company stresses, will remain one of its focus markets in the region in the future, with the company seeing great potential in the years to come for many different kinds of investment, such as shopping centres in regional cities with populations under 500,000 and for office developments in Poland’s largest regional cities. Overall, TriGranit has a development pipeline valued at more than EUR 500 mln for the country, consisting of two retail projects with 160,000 sqm gba and eight office buildings with around 135.000 sqm gla, all of which are scheduled for completion over the next three to five years.