WARSAW. SEPTEMBER 20. INTERFAX CENTRAL EUROPE - Recent price increases for Polish office space are more sustainable than the jump in residential real-estate prices seen over the past two years, according to Sven von der Heyden, chairman of the international real estate developer, the Von der Heyden Group.
"Relatively speaking to residential, yes, [rising office rents] are more sustainable because you have an economic drive behind them," von der Heyden told Interfax. "You have companies growing, companies making money and companies fighting for better quality."
Prime Warsaw office rents have jumped to a high of EUR 27 per square meter (sqm) in the last six months, following levels that dipped to as low as EUR 15 per sqm in 2004/2005 - a level which is a far cry from EUR 40 per sqm rents seen in the late 1990's.
Rents in large regional cities, such as Poznan, have also risen, oscillating between EUR 14-15 per sqm, according to the developer. In the first half of 2007 demand for office space in Warsaw was at 260,000 sqm, up 30% year-on-year (y/y), according to a report by international real estate agency Cushman&Wakefield.
This figure is expected to double in the second half of the year, although it will be lower than 2006 levels, the report stated, adding that Warsaw's dominance in the sector is likely to decrease due to the dynamic development of regional cities.
The jump mirrors even more drastic residential market increases, which saw prices for new flats in the capital jump by close to 50% in 2006, although asking prices increased by even more in prime locations in major cities. The residential sector, however, has seen a slow down in price increases since this jump - possibly as a first reaction to the subprime loans/residential crisis in the United States.
Real-estate Developer Dom Development reported that apartment prices had increased at a rate of 10.6% in the first half of 2007, up to an average of PLN 8,133 sqm in June 2007. Yet average prices for apartments in Warsaw increased by 1% between June and July 2007, to PLN 9,625 per sqm, according to internet real-estate portal Oferty.net.
Yet commercial real estate rents are still on the increase - a fact that von der Heyden attributed to the overall health of the Polish economy.
According to a report published by global real-estate consultant Cushman & Wakefield, office space supply in Poland will increase by approximately 20% by the end of 2008. The increase will constitute some 800,000 sqm of usable office space -although, according to von der Heyden, it could be detrimental to the office sector if prices were to drastically increase.
"It would not be good if rents skyrocketed, to EUR 30 plus," von der Heyden said. "[...] what has happened on the residential market is not healthy in my opinion."
AB/PS/JT
Interfax Central Europe - September 20, 2007
