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Bank Austria Real Estate Country Facts:
Polish real estate market very attractive to investors – for how much longer?

• Polish real estate market enjoys great popularity among international investors: Economic stability and well developed market make it attractive
• Investment volume in Poland came to EUR 3 billion in 2011, making it the most popular real estate location in Central and Eastern Europe among international investors
• Signs that the market may soon reach the peak of its development: Following strong compression, prime yields are lower than in the rest of CEE
• Warsaw office market booming – high completion rate in 2012 and full project pipeline indicate another increase in office space
• Shopping centre market well developed – high need for renovation of older shopping centres in order to remain competitive; growth market in smaller cities, where there are good opportunities for specialist outlet centres and local shops
• Gap between ideals and reality on housing market: Despite decline in prices, consumers still lowering their expectations regarding size, features and location

Poland’s economy has shown itself to be relatively immune to crises and robust in past years. For example, Poland was the only EU country to achieve real economic growth – of 1.6 per cent – in 2009. In each of the past two years, the recovery caused the growth rate to soar to 4 per cent. Despite the slowdown in economic growth caused by the debt crisis in the Eurozone and the associated decline in investment activity, growth is expected to come in at a stable 3 per cent for 2012. The solid economic growth in combination with an appealing size and an already well developed market are the main factors that make the Polish real estate market so attractive to international investors.

Poland the most attractive real estate market in CEE – but it seems to be at its peak
According to Reinhard Madlencnik, the head of Real Estate at Bank Austria, “The Polish real estate market showed just how attractive it is in 2011. Roughly 30 per cent of the EUR 11.2 billion invested in commercial real estate in CEE in 2011 went to Poland. That means that for international investors, Poland was the most attractive investment market in the CEE region.” Poland also stands up in comparison to the rest of Europe: In a recent survey by Ernst & Young about the attractiveness of real estate investment locations in Europe, Poland took an impressive third place after Germany and Switzerland. In the same ranking, Austria had to make do with eighth place. The popularity of the Polish real estate market among investors led to a strong compression of yields. “As a result of the strong interest among buyers, yields in the prime segment have already declined substantially. With 6.25 per cent prime yields available on the Warsaw office market, Poland’s capital had one of the highest rankings in CEE at the end of last year. From our point of view, that is a sign that the Polish office property market could be very close to its peak,” continued Madlencnik.

Office market saw very strong development over the past decade – secondary cities becoming more interesting
Poland’s office market is highly concentrated on the “hotspot” of Warsaw. However, a growing office market is developing slowly but surely in several of the many populous secondary cities. “When it comes to the office market, the focus of international developers and investors is on the capital city. In the regions, there are more Polish developers active, and they are better able to judge the existing demand and adapt projects based on that,” said Karla Schestauber, a real estate analyst at Bank Austria, summing up the situation. Poland’s capital currently has 3.6 million square metres of modern office space. That is roughly triple the amount it had in the year 2000. “Another 250,000 to 300,000 square metres are expected to be added in 2012. The project pipeline is also well stocked,” said Madlencnik, describing developments on the Warsaw office market. When it comes to the rents for office space here, there were considerable corrections due to the financial and economic crisis. “While the prime rent on the Warsaw office market was still EUR 30 per square metre in 2007, it came in at EUR 25 per square metre at the end of 2011,” added Schestauber.

Polish retail market well developed – potential for expansion in smaller cities
With roughly 225 square metres of retail space per 1,000 inhabitants, Poland – the most populous EU country in the East, with 38 million inhabitants – is below the Western European average. However, the average purchasing power in Poland of roughly EUR 6,000 is a hefty EUR 5,500 below the European average. “Although the Polish market already has a good supply of shopping centres, it gained 500,000 square metres of retail space last year alone. In some smaller cities with less than 200,000 inhabitants, however, there is still demand. This is where roughly two-thirds of the space under construction is located,” said Madlencnik, talking about developments on the Polish retail market. He added, “Due to the demographic structure and the lower purchasing power in smaller cities, specialist outlet centres and smaller neighbourhood shopping centres are generally successful forms of retail shopping space.”

Poland remains an attractive expansion destination for international retailers. However, because roughly one-third of all shopping centres are over ten years old, the high need for renovation represents a great challenge for operators. “To remain competitive, many first- and second-generation shopping centres will need to be renovated and modernised,” said Schestauber.

Prices on Polish housing market decline following boom after EU accession
Poland’s accession to the European Union in 2004 triggered a veritable boom in housing prices. The international financial crisis in 2008/09 also took its toll here and put a stop to the increase in prices. Between 2009 and 2011, prices fell by roughly 13 per cent, and there were also hidden price corrections in the form of discounts or included extra features. A survey of potential home buyers revealed that most people have had to lower their expectations more or less. “Home buyers are either opting for smaller flats than originally planned or are settling for less prominent neighbourhoods and cutting back on furnishings and fittings,” said Schestauber in conclusion.

Enquiries: Bank Austria Press Office Austria
 Julia Wegenstein, tel. +43 (0) 50505 - 52854
 E-mail: julia.wegenstein@unicreditgroup.at

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