Trends Radar from Cushman & Wakefield: Tough Times Build Strength

Rent indexation scheduled in lease agreements for early 2023 will push rental rates up by 7-9% in a single move. We also expect that service charges will increase by around 25-60%. The actual growth in service charges will largely depend on the price of electricity contracted by landlords for 2023 and whether landlords applied for the freezing of energy prices for micro, small and medium-sized enterprises,

comments Katarzyna Lipka, Head of Consulting & Research, Cushman & Wakefield.

Mitigating the environmental impact of properties and green certification should certainly not be reduced to cost cutting only. There is, however, no denying that improving the energy efficiency of buildings and the increasingly popular green leases are likely to boost the bottom line of market players and add value to properties in the long term,

says Katarzyna Lipka.

The reason is a slowdown in development activity, with 2023’s new supply in Warsaw expected to reach around 60,000 sq m, accounting for approximately 20% of the five-year average. Regional city office markets are also likely to witness lower new supply levels in the coming quarters. Office demand will, however, be highly correlated with the pace of economic growth. That said, 2023 is shaping up to be a year of renewing leases made in the peak years of 2018-2019, which is expected to bolster this year’s demand,

explains Jan Szulborski, Office Market Expert, Cushman & Wakefield.

Many retail tenants are just emerging from the COVID-19 crisis and, having learnt the lesson during the pandemic period, they now expect more lease flexibility from landlords. Both short-term leases and leases with turnover-based rents only are becoming increasingly popular. Some new leases will also incorporate clauses with a cap on rental and service charges growth,

comments Ewa Derlatka-Chilewicz, Retail Market Expert, Cushman & Wakefield.

We expect that the European industrial market will evolve towards nearshoring in the coming years, which will minimize the risk of supply disruptions caused by unforeseeable events. This in turn is likely to benefit Poland as some Western European countries are taking measures to reduce their reliance on Asian markets. In addition, some companies from Poland’s eastern neighbours are investing their capital in our country on account of geographical proximity and much greater safety of doing business here,

explains Vitalii Arkhypenko, Industrial Market Expert, Cushman & Wakefield.

In addition, Poland’s changing demographics will drive the growth in senior housing formats – not only typical care homes, but assisted living flats in particular. The co-living sector is also expected to be back in the game again following a brief period of stagnation caused the pandemic and travel restrictions,

says Karolina Furmańska, Residential Market Expert, Cushman & Wakefield.

What’s more, investors are targeting not only the largest Polish cities such as Warsaw and Cracow, but also leisure destinations, which - in turn - is creating a more positive price perception by investors. Going forward, capital market activity is expected to remain subdued due to constrained financing as well as economic and geopolitical concerns. Transactional activity is, however, likely to pick up if more owners begin considering selling their assets,

explains Maciej Prończuk, Hospitality Market Expert, Cushman & Wakefield.