This year’s strong opening for the Polish commercial real estate market is a stark contrast to the dismal performance of 2009. In what is quickly becoming a renter’s market, owners are responding by lowering expectations. Although, the fall-off in retail construction could help boost rents in that market. See the following article from Property Wire to learn more.
Last year was one of the weakest periods for the commercial property market in Poland in terms of volume and value, showing just how much east European economies have suffered, according to a new report.
With only 20 deals totaling €698 million 2009 was a low point but now activity seems to be picking up, says the latest analysis form consultants Cushman & Wakefield.
In January and February transaction volume was close to the levels recorded for the whole of 2009, with some further transactions still in the negotiation stage, the report says.
If this trend continues into the rest of 2010, total volume may be nearly three times as great as in the crisis year of 2009 and could exceed €2 billion, according to Aleksander Loster, senior surveyor from Capital Markets Group of Cushman & Wakefield.
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‘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,’ he explained.
‘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,’ he added.
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, the report says.
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.
‘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 dropped. Lease renegotiations increased significantly from about 10% in 2008 to around 22% in 2009,’ explained Katarzyna Opalska, an analyst from Cushman & Wakefield’s advisory department.
Vacancy rates rose with rental rates going down, in some cases by as much as 25%, she said. ‘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,’ she added.
The situation on the modern industrial market in Poland is slowly improving and 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 the report says.
The global financial crisis has taken its toll on the retail market in Poland shown by vacancies, significant adjustment in tenant mix and extension of the process of commercialization of shopping centers being currently developed.
Decline in development activity will lead to the fall of annual supply of shopping centers space between 2010 and 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, it adds.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.