Residential developers vs. office developers

There are less and less available investment lands in Warsaw. However, the potential demand for apartments and offices seems to remain the same. Are we going to experience an intensified competition between developers of these both industries?

The Warsaw office resources have amounted to almost 5 million sq. m of leased area since the nineties. The increase is related to the dynamics of functional and economic changes that occurred in the capital. According to the experts’ opinions based on patterns of developed Western European countries, the potential of Warsaw in the area of development in that field is equally important. In accordance with the REAS estimates based on data of the Central Statistical Office of Poland, developers have realized about 17 million sq. m of new apartments (about 240 thousand premises) in the same period in the capital. However, the need as well as the real demand are still unsatisfied.


In this perspective, the demand for investment areas is mainly recorded by residential developers. To some extent, its scale is levelled by territorial coverage and substantial spread on the area of the city. On the other hand, the activity of developers from the office market is mainly concentrated on the area of the city in its central as well as southern and western part. It also has an impact on availability of plots for new investments.


The period of a very good condition of the domestic residential market has had a significant impact on transaction prices of plots within last three years. Therefore, both segments of the market became competitive in certain areas of the city. This conflict has a small territorial scope and includes mainly the eastern part of Wola and Służewiec Przemysłowy – says Karol Dzięcioł, partner in REAS who manages the team of Developer Consultancy and Assessment. The development conditions are different in both parts of the city. Office market has developed in the Warsaw Służewiec district as the first one. Then, residential developers started their business activities on that area. Taking the currently realized and planned investments into account, there are very strong presumptions to claim that this office fragment of Warsaw will develop into more urban part of the capital – a multifunctional district – within the nearest years – comments Maximilian Mendel, partner in REAS responsible for transaction consultancy.


Thanks to hundreds of people working in the neighborhood, residential developers noticed the potential of that area. On the other hand, market factors and change in trends contributed to decrease in scale of operations of office developers in this part of Mokotów.


According to estimates of REAS, 2.5 thousand apartments are currently being built on the area of Służewiec Przemysłowy. Ca. 3.8 thousand of them have been commissioned in the neighborhood within last ten years. In result, the apartment resources will increase by ca. 150 thousand sq. m within the nearest 2-3 years, and by ca. 0.4 million sq. m of usable area from 2005. While comparing it with the office area, which has been assessed by the experts of the commercial market at ca. 1.3 million sq. m, the substantial levelling of proportions is noticeable.


The development of both segments on Wola was more harmonized. In spite of the fact that there is an opportunity to build skyscrapers in that place, the activity of investors from the residential market was not slowed down on that area. Both residential and office developers are buying new plots and announcing new investments. According to data of REAS, the increase amounting to 700-800 thousand sq. m of office area and 300-350 thousand sq. m of residential area will be noticeable within the nearest 5-10 years.


The process of searching for new areas is still being conducted. At present, developers are prone to pay higher prices and strongly compete with each other due to limited supply of easily accessible investment plots. On comparatively small areas of Warsaw – attractive for both functions – there may actually occur some situations when residential and office developers will jostle for the same plots – adds Karol Dzięcioł.


It is worth pointing out that the commercial industry prefers exposed areas, on which there is an opportunity to build skyscrapers, whereas the residential sector is concentrated on a lower development that offers more privacy to all purchasers of apartments.


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