Investment in Polish commercial property picked up in January and February, with transaction volumes close to the levels recorded for the whole of 2009, according to Cushman & Wakefield's latest report on the Polish market.

Investment in Polish commercial property picked up in January and February, with transaction volumes close to the levels recorded for the whole of 2009, according to Cushman & Wakefield's latest report on the Polish market.

'If this trend continues into 2010, total volume may be nearly three times as great as in the crisis year 2009,' said Aleksander Loster, Senior Surveyor from the Capital Markets Group of Cushman & Wakefield. With only around 20 deals totalling EUR 698 mln, the year 2009 was one of the weakest for the commercial property investment market in Poland on record, both in terms of deal volume and value.

Prime office and retail properties are attracting strong interest from institutional investors, according to the report. A number of owners are showing a willingness to accept new, lower price levels in a bid to generate financial resources for new investments 'which should also help improve the liquidity of commercial real estate,' Loster said.

While office leasing volumes are increasing on the back of notable rent falls and attractive incentive packages, demand is still too weak to absorb the space delivered in the buildings whose construction started at the peak of the market. As a result, vacancy rates rose across Poland in the first two months of 2009.

Katarzyna Opalska, an analyst with the advisory department of Cushman & Wakefield, said: 'In 2009 the market was primarily characterized by a 50% fall in gross office take-up (compared to 2008). Both the number of concluded deals and the average amount of occupied space (in particular for areas over 3,000 m2) dropped. Lease renegotiations increased significantly (from about 10% in 2008 to around 22% in 2009). Vacancy rates rose with rental rates going down, in some cases by as much as 25%. Promising economic forecasts indicate that the current year may see a slight pick up in demand, with more prominent recovery to be expected in 2011.'

In the retail market, the decline in development activity will lead to a fall of annual supply of shopping centre space between 2010-2011. '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,' said Katarzyna Michnikowska, senior analyst with C&W's Advisory Department. 'The market has become a tenant’s market and retail chains have more possibilities to select location, negotiate lease terms and rental rates.'