Polish economic growth prospects remain among the most favorable of all the countries of Europe.e
Due to the good performance of the economy and planned fiscal reforms, Polish economic growth prospects remain among the most favorable of all the countries of Europe. In the first quarter of 2011, improved economic climate and rising foreign investment have contributed to the growth in demand for high quality office space. However, due to financial problems of developers and strict lending policies of banks, just few new facilities were completed, which resulted in limiting the supply of Class A surfaces. This in turn led to an increase, in the last quarter, of the highest rents in Warsaw and yield compression. On the other hand, regional markets are still considered relatively risky, as evidenced by the low activity on the rental and investment markets and stable rents in most locations.
RENTAL MARKET TRENDS
After a slowdown in 2009, the demand has increased significantly in the past year and this upward trend continued in the first quarter of 2011, in which the lease agreements were signed for a record 198 thousand sq m. Warsaw market has an increasing demand for modern office space, which consists of both the lease renewal and new business. This is due to the fact that tenants want to protect their surfaces before rising rental rates reach the level from before the crisis. Warsaw resources of office space has not changed during the quarter and in 2011, the majority of new space will be delivered in locations outside the center, which shows the downward trend in supply in the CBD. In the first quarter the pace of development projects slowed down, which resulted in a decrease in vacancy rates and increased activity on the rental market.
INVESTMENT MARKET TRENDS
In the first quarter of 2011, the volume of investment in the office market increased by almost 400proc. compared with the previous quarter to 486 million EUR and accounted for 80 percent. of all investments over this period.All transactions were concluded in Warsaw by foreign investors. In the first quarter, the biggest transaction was the acquisition of a Europlois company's real estate (five office buildings in Warsaw) by CA Immo. Due to the limited supply of Class A surfaces, yields fell during the quarter to a level of 6.40 percent. . Given the rising rents, the recovery in demand and a small number of persisting and completed investments, further yield compression is possible.
If necessary fiscal and labor market reforms will be carried out, Poland will continue to grow at a rate of about 3-3.5 percent. in the medium term perspective. Throughout 2011, the supply of office space, and especially the Class A, will remain stable. However, the increase in demand will reduce vacancy rates. Demand from investors is still strong, but the lack of high-quality products may limit the number of transactions.