Ernst & Young, a firm providing consulting services in the field of audit and tax advisory and transactional business, has developed a comprehensive guide to the Polish real estate market - "The Polish Real Estate Guide".A separate section in a publication was devoted to office space market.
Guide to the Polish real estate market
We present a summary of the Guide to the Polish real estate market by Ernst & Young (the part about the office market). Over 160 pages publication is available in English only.
Office part of the real estate market has been shown with a wider, political and economic perspective. Experts of Ernst & Young analyzed the office space market in Poland for over twenty years, since the beginning of the government transition to the present time. The report takes into account the '90s and the beginning of the twenty-first century, up to 2011, Particular emphasis was placed on the historical and economic factors and the groundbreaking moments for the Polish office market. Supplementing the report are a number of charts and a list of the most important office investments in Warsaw. It is the capital of the Polish, that has a special place in this publication.
In the years 1989 - 1997 in Poland, 300 000 sq m of office space was created, while in 1998 completed office projects already occupied 680 000 sq m of office space. Two years later, in the market there was already 1 360 000 sq m of modern office space.
At the beginning of the new decade, a location in the center was no longer at the forefront (54 percent in 2000.). Since 2001, with the exception of 2003, the growth of new office space was greater in locations outside of the city center. In 2011, from 3 600 000 sq m of modern office space as much as 65 percent. was outside the central locations.
Boom in the real estate market in the years 2000 - 2002 led to overgrowth of supply over demand and an increase in vacancy rates. In Warsaw, this indicator decreased steadily in the years 2002 - 2007, increasing again on the wave of the crisis in 2008 and 2009. In 2011, in Warsaw, the vacancy rate fell from 8 percent. in 2010 to 6.7 percent.
In 2010, there was 200.000 square meters completed - it was largely thanks to the resumption of investment, dropped during the crisis. These projects was to be a kind of a provision of the heightened security of funding the future investments. In 2011, new supply should reach 120.000 sq m Buildings outside the city center are prevailing.
Companies that have their headquarters in are responsible for demand. They have contributed to the rapid economic growth of the country. Companies that started their operations in our country in 2004, shortly after the Polish accession to the European Union and in the years 2007 to 2008, when we saw rapid economic growth in Poland also have a significant contribution to the creation of demand. Much of the demand is related to the companies in the BPO sector (Business Process Outsourcing).
Economic growth picked up in 2007, which resulted in that the amount of rented space has grown to nearly 500 thousand square meters and 525 thousand square meters a year later and started to shrink at the end of the year. In 2009 the lease agreements covered approximately about 210 thousand. square meters, about 40 percent of office space available in the previous year.
At the moment the demand is, in lesser extent, subject to the expansion of companies on the Polish market, for the most part it is a consequence of searching for a better location or lease cost optimization.The crisis of 2008/2009 has adversely affected the demand, but the demand for office space improved in 2010. In 2011, 573.000 square meters of office space was probably leased, and if true, this would mean an increase in demand by 4 percent. It can be expected that this year the demand will continue in an upward trend.
In 2012, rents will probably remain stable, with a tendency to a slight increase in central locations. The difference between what tenants are willing to pay and the sum of rent can amount to 1-2 per cent.
After a limited supply of office space in the 80s and early 90s, rents reached its record level in 1991 (50$ per sq m). With little variation of market, rents in central locations and outside did not differ significantly from each other. This situation changed in the late 90s, when the office market experienced a sharp increase in office space. In 1996, office complexes became popular, they were located on the outskirts of the city, which had a direct impact on price differentials. At the end of the 90s, rents outside city centers were lower by 25 - 30 percent., though of course not only the location had an impact on the price.
Another boom in the supply market, at the beginning of this century, meant that the gap between prices in centers and out of central locations increased, which resulted in a reduction in rents. Currently, the average rental rate in the city is 22 - 25 EUR per square meter and 12 - 15 EUR outside the city center. Final rents are 10 - 15 percent below the reserve prices. The price is determined primarily by factors such as location, quality of finish, the surface and the length of the lease.
Characteristics of the lease
After the introduction of the euro, most leases are denominated in the common currency but paid in PLN, which as of 2009 regulates the Polish law.
The prices are escalated by Eurostat (European Statistical Office) and the U.S. consumer lease price index in USD.
Maintenance fees include water, electricity, heating, air conditioning, and cleaning services. Those fees are included in the rents (net), and the amount varies depending on the size of the property rented.
Fees for the use of common space (elevator, lobby, reception) are usually included in the proportion of net office space.
In addition to the rent and maintenance fees, tenants have to pay 23 percent tax. In addition, the tenant makes a deposit - usually the equivalent of three months' rent.
On average, the contract is concluded for a period of 3 - 5 years, in the case of larger tenants this value may increase.
To encourage tenants, the first 3 - 6 months are exempt from paying rent.
They also receive additional payment, for the interior design, of 150 - 250 EUR per sq mDownload PDF