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With only around twenty deals totaling ca. €698 million the year 2009, both in terms of deal volume and value, was one of the weakest periods for the commercial property investment market in Poland on record.

“In the first quarter of 2010 the investment activity on the Polish commercial property market was clearly picking up. In January and February the transactions volume was close to reach the levels recorded for the whole of 2009, with some further transactions still in the negotiation stage. If this trend continues into 2010, total volume may be nearly three times as great as in the crisis year 2009 (to exceed €2 bln.),” says Aleksander Loster, Senior Surveyor from Capital Markets Group of Cushman & Wakefield.

“Prime properties, mainly office and retail, regarded as the safest investment, arouse the highest interest of institutional investors. This type of property shows certain signs of yields compression, with riskier products still being evaluated more cautiously by potential purchasers. A number of owners showed willingness to accept new, lower price levels, seeking financial resources for new investments – which should also help improve the liquidity of commercial real estate,” adds the expert.

The office lease market was slowly getting over the slump in late 2008 and in early 2009. The leasing transaction volume was increasing on the back of notable rent falls and attractive incentive packages. Nonetheless, the demand was still too weak to absorb the space delivered in the buildings whose construction started at the peak of the market. As a result, vacancy rate rose across Poland. Considerable lower demand and difficulties in obtaining finance for new projects led to a halt of many planned investments, waiting for the market to recover.

Katarzyna Opalska, Analyst from Advisory Department of Cushman & Wakefield, said, “In 2009 the market was primarily characterized by 50% fall in gross office take-up (compared to 2008). Both the number of concluded deals and the average amount of occupied space (in particular for areas over 3,000 m²) dropped. Lease renegotiations increased significantly (from about 10% in 2008 to around 22% in 2009). Vacancy rates rose with rental rates going down, in some cases by as much as ca. 25%. The market changed radically, which brought a definite shift toward a tenant’s market. The biggest beneficiaries of that situation will be large-scale tenants, which may now expect notable rental concessions and favorable additional incentives. After all, their decision to sign a lease agreement may be conditional for the construction project to kick off. Promising economic forecasts indicate that the current year may see a slight pick up in demand, with more prominent recovery to be expected in 2011.”

At the end of 2009 modern warehouse space stock in Poland amounted to over 6,000,000 m². As expected, the supply growth slowed down, with approx. 857,000 m² of new warehouse space delivered onto the market. At the end of 2009 vacant warehouse space in Poland totaled nearly 1,000,000 m², concentrated mainly in Warsaw and Upper Silesia. The year saw twofold decline in warehouse take-up compared to 2008, reaching 765,000 m².

The situation on the modern industrial market in Poland is slowly improving. Tomasz Mika, Senior Negotiator from Industrial Department of Cushman & Wakefield, says that, “2010 is expected to see a slight increase in the number of transactions when compared to 2009, however the results will be still far behind the figures for 2007-2008. Most of warehouses currently being constructed are tailored to the client’s needs (pre-lease, built-to-suit), but speculative investments are also planned. Rental rates will remain at low levels in locations with high vacancy rate. Other locations should see gradual recovery of prices.”

2009 was a record year in terms of supply with over 900,000 m² of retail space which hit the market as a result of the delivery of the projects started during the boom period. Nearly 57% of this space was completed in the second half of the year and included Bonarka in Kraków, Galeria Jurajska in Czæstochowa, Focus in Piotrków Trybunalski and the first phase of IKEA Port Ùódê. At the end of 2009 modern retail space stock in Poland totalled 9,345,000 m², including shopping centers (72.9%), retail warehouses and retail parks (19%), factory outlet centers (0.9%) and other retail schemes (7.2%). Small- and medium-sized cities increased their share in the total space volume last year (39.8%).

Katarzyna Michnikowska, Senior Analyst from Advisory Department of Cushman & Wakefield, says, “Global financial crisis is finally taking its toll on retail market in Poland, evidenced by vacancies, significant adjustment in tenant mix and extension of the process of commercialization of shopping centers being currently developed. The market has become a tenant’s market and retail chains have more possibilities to select location, negotiate lease terms and rental rates. Decline in the development activity will lead to the fall of annual supply of shopping centers space between 2010-2011. The lack of space for lease will limit the expansion possibility of retail chains, which will be forced to seek retail units on the secondary market and accept rising rental rates.”

Source: Cushman & Wakefield