POLAND OFFICE DESTINATIONS

Transcription

1 POLAND OFFICE DESTINATIONS 2 Edition Includes Selected General Legal Aspects of the Real Estate Business prepared by Hogan & Hartson.

2 POLAND OFFICE DESTINATIONS 2 Edition 2 Edition DISCLAIMER2 CB Richard Ellis Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.

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4 CONTENTS CONTENTS Offices in Poland Warsaw Krakow Wroclaw Poznan Katowice Lodz HOGAN & HARTSON 2 Tri-City 2 Office Investments 22 Office Market Practices 2 Building Standards 2 Selected General Legal Aspects of the Real Estate Business 2

5 OFFICES IN POLAND OFFICES IN POLAND OFFICE STOCK IN REGIONAL CITIES (sq m) Krakow Wroclaw Tri-City Katowice Poznan Lodz 2 SUPPLY OF OFFICE SPACE IN MAJOR CITIES At the beginning of the year in Poland there was around. million sq m of modern office space located in Warsaw and seven major regional cities. The largest and the most established market is Warsaw. However, when comparing with other European capitals, Warsaw is still behind the mature markets. Office density in Warsaw is currently around. sq m per capita, while the average for Europe is estimated at sq m. Budapest VACANCY RATES IN POLISH CITIES IN Q 2 % % 2% % % % Current Stock Under Construction till 2 EUROPEAN OFFICE DENSITY (sq m per capita) Moscow Warsaw Prague London Madrid Berlin Dublin Brussels Paris 2 2 Lodz Wroclaw Poznan COUNTRY S ESSENTIALS MARCH 2 Population (`) Unemployment Rate Monthly Average Gross Salary (EUR) Modern Office Stock (in ` sq m) Average Office Vacancy Rate Warsaw Prime Office Rents (EUR/sq m/month) TriCity Krakow Katowice,.2%,. % 2 Regional markets have recently revealed their potential and within the last two years around, sq m of brand new office space (% of the regional stock) was completed. Moreover, currently there is, sq m under construction scheduled for delivery in 2 and 2. By the end of 2 the total office stock in the six major agglomerations, including Warsaw, should amount to almost. million sq m. Krakow, Wroclaw and TriCity are the leaders in terms of the existing modern stock. However, other cities, including Lodz, Lublin, Szczecin and Rzeszow also offer many unique advantages and have attracted significant investor interest. Unfortunately the global economic turmoil halted the development boom that had been observed till the end of 2. Developers suddenly found it difficult to secure financing as well as tenants for the new projects. Many of them were postponed and only investments already under construction or in a very advanced stage have the chances of being delivered according to the schedule. Currently the real estate market is fully controlled by the banks. Such a situation leads to a destructive stagnation when the vacancy is kept low and there is limited pressure on rents, despite lower demand. Conversely the crisis has made the market more reasonable. There were many unrealistic plans to construct vast high towers in a number of cities. Many buildings were delivered too quickly and with a low quality fit-out. Today s uncertain times require thorough analysis and revaluation of all projects in order to achieve the best results, verified by the market. In the line with the so called flight to quality trend, nowadays only the best projects with secured pre-lease agreements have a chances of meeting the banks approval. Those developers who manage to secure the best locations and who will be ready with new office buildings in 2/2 when the economy is expected to recover, will be the winners. As all the rents are usually quoted in EUR, the introduction of EUR currency in Poland would have a huge impact on the stability and creditworthiness of developers and the whole Polish commercial real estate market. At the moment, the volatility of the Polish Zloty (PLN) is a significant barrier for new investors seeking to enter the Polish market and sign new lease agreements. Both governmental initiatives and the efforts of local authorities to a large extent would limit the consequences of the current economic slowdown.

6 OFFICE TAKE-UP IN REGIONAL CITIES IN 2 (%) % OFFICE PRIME ASKING RENTS IN MAJOR CITIES (EUR/ sq m/ month) % % Lodz % Katowice Poznan 2% 2% Wroclaw TriCity Krakow Krakow TriCity Poznan Wroclaw Katowice Lodz OFFICE TAKE-UP ( ) IN EUROPEAN CITIES IN Paris Moscow London Warsaw Madrid Brussels Berlin Budapest Prague Warsaw Dublin DEMAND FOR OFFICE SPACE IN POLAND We estimate that in 2, both Polish and international companies, including BPO investors, leased over, sq m of office space in Warsaw and almost million sq m in the whole country. Offshoring investors typically prefer non-capital cities, where the costs of operations are lower. So far the most popular location amongst BPO operators has been Krakow which has become a centre of services in Europe. Wroclaw turned out to be extremely popular with manufacturing and high-tech companies. BPO operations in Poznan include companies that appreciate the good location, number of manufacturers and trade traditions of the city. Companies open financial centres in Poznan to serve their branches in Poland and Germany. In recent years Lodz, TriCity and Katowice have become extremely attractive to manufacturing and outsourcing companies. Those cities however still need inner and outer infrastructure improvements as well as more high-quality office space. The cost cutting and restructure that is taking place in many corporations, surprisingly may bring more investments in Poland, particularly in smaller cities. At the end of 2 all the development strategies were frozen, but now there are the first signs of such movements being observed. Large manufacturers, IT and other service providers are being forced to close operations in Western Europe and to concentrate on low budget locations such as Poland. RENTS FOR OFFICE SPACE IN POLAND Currently prime asking rents for the highest quality office space in Poland range from EUR 2-2 /sq m/month in Warsaw City Centre to EUR /sq m/ month in the best buildings in other cities. We may witness further reduction till the end of the year, particularly in effective rates. Developers will be likely to offer more incentives. COMPARISON OF REGIONAL CITIES ATTRACTIVENESS IN TERMS OF BPO INVESTMENTS AND THE SIZE OF AVAILABLE OFFICE SPACE* Quality of Business Environment Availability of Qualified Labour Force Poznan TriCity Lodz Wroclaw Krakow Katowice Warsaw * - size of the bubbles is proportional to the size of current vacancy registered in office buildings existing and under construction in sq m. OFFICES IN POLAND

7 WARSAW WARSAW GENERAL OVERVIEW Warsaw - the capital of Poland is also the economical and political centre of the country. It is located at the Vistula River in the central part of Poland. The majority of foreign companies have their headquarters located here, because Warsaw already is and definitely will remain the most important city in the region. WARSAW OFFICE STOCK Modern office stock in Warsaw totals approximately million sq m, with % located in the City Centre. The other popular office locations are Mokotow, Okecie (next to the Airport) and Wola districts well as the Jerozolimskie Avenue. In 2, a total of 22, sq m of office space was delivered to the market in 2 office buildings. The largest ones were Marynarska Business Park in Mokotow (US) and North Gate in Zoliborz (N). Approximately, sq m of office space is currently under construction, most of it out of the City Centre. However, only half of it is being built speculatively. Additionally only, sq m is planned or declared by developers to be delivered until the end of 2. The most active developers include Ghelamco, GTC, Immoeast, Skanska, Echo Development, although the economic slowdown to a large extend has limited their activity. RONDO LOCAL ESSENTIALS MARCH 2 Population (`) Unemployment rate Average Gross Salary (EUR 2), 2.2%, OFFICE DEMAND During the last few years the Warsaw office market has been witnessing a very strong level of letting activity with the take - up reaching a record figure of over half million sq m in 2. This has impacted on the vacancy rate, which was recorded at a very low level of % at the end of 2. Large companies looking for new office premises had no choice but to sign pre-let agreements, which accounted for almost % of the total take - up last year. The average size of a leased office has been increasing currently it stands at around, sq m. In Q 2 the highest level of vacancy rate by submarket was recorded in the CBD district (.2%) whereas the lowest level was noticed in Wola district (2%). We expect that in the upcoming years the demand for office space will be decreased and the vacancy level may rise, even despite the limited completions. In Q 2 total take-up was only, sq m while vacancy rate rose to.%. Modern Office Stock (in million sq m) Vacancy rate Prime rents (EUR/sq m/month).. % 2 2 OFFICE RENTS Prime headline rents in the City Centre decreased to the level of EUR 2 2 /sq m/month. In Non-Central locations for the best projects, headline rents are oscillating at around EUR /sq m/month. Effective rates are around 2% lower. In the near future we may expect a further decrease, particularly in average rates, currently at EUR - 2 /sq m/month. Developers, in the light of lower demand, offer more incentives, particularly in Non-Central locations.

8 2F No OFFICE PRIME RENTS (EUR/sq m/month) Warsaw Spire 2 Office Space (sq m) Location Status Fringe of City Centre, Rondo CBD, Warsaw Financial Centre CBD, Pulawska Financial Centre, PZU Tower CBD, Zlote Tarasy Lumen & Skylight CBD, Marynarska Business Park, Warsaw Trade Tower, US - Mokotow US - Mokotow Fringe of City Centre 2F Business Parks Project Wilanow Office Park SE - Wilanow, Empark US - Mokotow 2, Wisniowe Ogrody SW - Okęcie, 2 Wiśniowy Business Park SW - Okęcie, Poleczki Business Park LS - Puławska, UC 2 2 WARSAW LARGEST OFFICE BUILDINGS IN WARSAW OFFICE COMPLETIONS (` sq m)

9 KRAKOW KRAKOW GENERAL OVERVIEW Krakow with a population of around, inhabitants is the most important city in the south and is the second largest one in Poland. Due to its economical advantages such as a well educated labour force, lower prices and good business climate, Krakow has become one of the most appreciated locations for BPO investors. The city makes further efforts to attract foreign investments from the service sector, high technology as well as automotive aircraft sectors, although at the moment this may be proving to be more difficult. KRAKOW OFFICE STOCK The modern office stock in Krakow now stands at around, sq m. This number includes high standard office premises, containing newly built and fully refurbished (between and 2) schemes of A&B - class. The buildings are situated most often the fringes of the City Centre (around Mogilskie and Grzegorzeckie roundabouts, main railway station, along Armii Krajowej and Wadowicka Streets). Office buildings are also available within the Special Economic Zone along Jana Pawla II Street and in Zabierzow village. GTC OFFICE PARK Currently there are three business parks located in Krakow or its suburbs (Krakow Business Park, GTC Office Park and Rondo Business Park) and a few new ones planned (Enterprise Park, Quattro, BonarkaBusiness). In 2 there was around, sq m of office stock delivered in the city. LOCAL ESSENTIALS MARCH 2 Population, Among the most active developers there are local companies such as GD&K Group, Buma Group, Krakow Business Park, Azbud and international groups GTC, Echo Development, TriGranit, Quinlan Private Golub and Aldesa. The increasing demand from BPO companies has attracted a number of developers that have secured land for office projects. Currently there is around, sq m under construction with % pre-let. Next year we may expect a slight oversupply. Unemployment rate Average Gross Salary (EUR 2) Modern Office Stock (in sq m) Vacancy rate Prime rents (EUR/sq m/month).%,. % OFFICE DEMAND The demand in Krakow has been boosted by such sectors as IT, telecommunications and automotive - both by small companies and big multinational enterprises. The total take - up in 2 was estimated at the level of, sq m. The city is focused on attracting leading new technologies companies, such as Motorola, IBM, UBM and Shell. The largest deals in 2, were signed by State Street, Electrolux, Cap Gemini and ACS. Tenant are looking for A-class office schemes with a very good IT infrastructure. There is a growing popularity of business parks has been observed. OFFICE RENTS Asking rents in A-Class modern office buildings remain at EUR /sq m/ month. The incoming large number of office schemes both in the City Centre and Non - Centrally may increase the pressure on rents in the medium term. Developers will be more eager to offer incentives. Service charges range from EUR to per sq m monthly.

10 OFFICE COMPLETIONS (` sq m) LARGEST OFFICE BUILDINGS IN KRAKOW F No 2 Project Krakow Business Park Quattro Echo Opolska GTC Office Location Zabierzow Bora Komorowskiego Opolska Armii Krajowej Office Space (sq m),,,, Status Expanding UC - I Phase Expanding KRAKOW BonarkaBusiness Powstancow Slaskich 2, UC - I Phase OFFICE PRIME RENTS (EUR/ sq m/ month) Buma Square Enterprise Park Wadowicka Na Dolach 2, 2, CB Lubicz Lubicz, Expanding F Cracovia Business Centre Euromarket Pokoju Al. Jasnogorska,, 2

11 2 WROCLAW WROCLAW GENERAL OVERVIEW Wroclaw is the capital of the Lower Silesia region. It is situated in the south - western Poland on the Odra River in close proximity to the Czech Republic and Germany. It is Poland s fourth biggest city, with a large population of students (2 high schools). The local government continues the city s development strategy focusing on the creation of a favourable business and cultural environment for the inhabitants and new investors. WROCLAW OFFICE STOCK The total A&B - class office space stood at, sq m at the beginning of 2, out of which only % was A-class stock., sq m of the space is located in the City Centre - the most popular business location in Wroclaw. Other attractive locations include the western part of the city, along Legnicka Street and Strzegomska Street as well as in the southern part, particularly Powstancow Slaskich St. SILVER FORUM In 2 a record area of, sq m was delivered to the market. The majority of the projects are stand-alone buildings, new schemes or refurbished tenement houses in the immedite centre. For a long time only local developers (LC Corp, Archicom, Devco, FIG) have been active in the market. However, the growing popularity of the city has attracted large developers such as Skanska, Ghelamco and GTC. Currently, the development activity has slowed down. There is, sq m of office space under construction and additionally only, sq m of planned projects to be delivered by 2. LOCAL ESSENTIALS MARCH 2 Population Unemployment rate Average Gross Salary (EUR 2) Modern Office Stock (in sq m) Vacancy rate Prime rents (EUR/sq m/month),.%,. % OFFICE DEMAND Wroclaw s increasing economic role as a capital of the province guarantees stable future growth in the service sector. It is now the second most attractive city after Krakow, in terms of the number of BPO s. Companies such as Siemens, Hewlett Packard, Credit Suisse and Google have already chosen Wroclaw. Many projects were pre-leased before their completion. Some companies decided to refurbish the existing old premises (Kameleon, Renoma). The situation improved further and at the end of 2 the vacancy rate oscillated at around %. According to our estimations, in 2 the Wroclaw market absorbed around, sq m of new office space including pre-lets. OFFICE RENTS Office rents have been stable over the past five years. Recently they decreased particularly for buildings located far from the Centre. They are quoted at the level of EUR - /sq m/month. As Wroclaw is competing with Krakow, the rents are now pressured to go down.

12 OFFICE COMPLETIONS (` sq m) LARGEST OFFICE BUILDINGS IN WROCLAW F 2F OFFICE PRIME RENTS (EUR/ sq m/month) 2 2 No 2 Project West Forum CB Karkonoska Wroclaw Business Park Brama Poludniowa Grunwaldzki Centre Bema Plaza Wroclaw Business Park II Silver Forum Globis Centrum Orlat Location Strzegomska Karkonoska Horbaczewskiego Karkonoska Pl. Grunwaldzki Pl. Bema Wołoska Strzegomska Powstancow Slaskich Pl. Orlat Lwowskich Office Space (sq m), 2, 2, 2, 2, 22, 2,,, 2, Status To be expanded Expanding WROCLAW 2

13 POZNAN POZNAN GENERAL OVERVIEW Poznan has always been perceived as the city of business and trade, thanks to International Fairs and a number of national retailers having their origins in the city. It is situated on a very important transport route in the western part of Poland. It benefits from the presence of the sub-zone of Kostrzyn - Slubice Special Economic Zone, well educated labour force (, students at 2 high schools) and large manufacturers (Volkswagen, Unilever, GSK etc.) as well as BPO operators. The city was given st place in the ranking of region investment attractiveness when considering transport accessibility. OFFICE STOCK The majority of modern office buildings are located on the fringe of the historical city centre, concentrated mainly along Glogowska and Roosevelta Streets and in close proximity to the Old Town market. Many modern office schemes can be also found in the western district of Grunwald and in Winogrady, a non-central area of the Stare Miasto district. POZNAN Modern office stock in Poznan, including newly built and fully refurbished schemes of A and B class amounts to 2, sq m. Approximately % of this figure is located in the City Centre. In 2 there was, sq m of office stock supplied to the market in seven buildings. The largest ones were Omega (, sq m), Malta Office Park A&B (, sq m) and Nowe Garbary Office Centre (, sq m). DELTA LOCAL ESSENTIALS MARCH 2 The development activity in Poznan is not as intensive as witnessed in other regional cities. Currently there is around, sq m under construction with 2% pre-leased. Additionally, developers including Echo Investment and CDI plan to deliver another 2, sq m before the end of 2. Population Unemployment Rate Average Gross Salary (EUR 2) Modern Office Stock (in sq m) Vacancy Rate Prime Rents (EUR/sq m/month), 2.%, 2,. % OFFICE DEMAND The demand in Poznan is strong, evident by the high level of net absorption. According to our estimations ca., sq m of office space was taken-up in Poznan in 2. The demand for office space in the city has been primarily generated by IT and professional services providers. However in 2 the most significant lease agreements were signed by Polish companies such as PZU, PKO SA, PAN or Solidex. The largest BPO s in the city are Franklin Templeton, Carlsberg and Man Star Truck. The total vacancy rate for Poznan remains at a low level of.%. OFFICE RENTS Rents have remained relatively stable in recent years, however at the moment we can expect some decreases. Asking rents for prime office space reach EUR /sq m/month.

14 OFFICE COMPLETIONS (` sq m) LARGEST OFFICE BUILDINGS IN POZNAN OFFICE PRIME RENTS (EUR/ sq m/ month) F 2F No 2 Andersia Tower & Front Office Malta Office Maraton Garden Mayland Centrum Biurowe Globis Delta House Project Szyperska Office Building Location Andersa Pl. Baraniaka Krolowej Jadwigi Szyperska Bukowska Roosevelta Towarowa Office Space (sq m), 2, 2,,,,, Status & Expanding Under Construction PGK Centrum I & II Marcelinska, Poznan Financial Centre Andersa Pl., Skalar Office Center Górecka, Under Construction POZNAN 2

15 KATOWICE KATOWICE GENERAL OVERVIEW Katowice is the scientific, educational, administrative and financial centre of the Upper Silesia region. The city has huge potential in attracting new investments thanks to a high population density, a well educated personnel, the presence of the Katowicka SEZ and a good transportation system with access to the international airport. The city has good chances to compete with Krakow and Wroclaw in attracting investors from the Business Process Offshoring sector and local companies. The city authorities announced a consistent development strategy and are in a good position to start a number of public investments to change the negative image of the city as the heavy industry and mining centre of Poland. KATOWICE ALTUS LOCAL ESSENTIALS MARCH 2 Population Unemployment rate Average Gross Salary (EUR 2) Modern Office Stock (in sq m) Vacancy rate Prime rents (EUR/sq m/month), 2.%,2, 2. % OFFICE STOCK The most popular locations for office occupiers are located along DTS (National Road ) and along the A Motorway at Chorzowska, Gornoslaska and Francuska Streets and at the Rady Europy Square. The total modern office stock in Katowice currently stands at the level of, sq m. Much of the available supply is located in buildings constructed before and in tenement houses offering low quality office space. Currently there are five projects under construction in Katowice with a total space of 2, sq m (CB Francuska, Atrium, Katowice Business Point, Reinhold Centrum and Havre Grabowa). Last year a number of developers such as GTC, TriGranit, Ghelamco, Echo Development and Skanska decided to launch new projects in Katowice. However, in the current economic circumstances only a few of them plan to continue these developments. OFFICE DEMAND Within 2-2 much of the existing stock was absorbed, resulting in a decrease in the vacancy rate. In 2 and 2 Katowice experienced the highest office demand. Last year the take-up figure is estimated at around, sq m. The largest corporations present in Katowice include ING, UPC, KPB Bank, CapGemini, Deloitte, Mittal Steel Poland, Allianz, Mentor Graphics or Steria. The vacancy rate for office buildings in Katowice currently stands at around.%. Once the offer of available offices improve, the number of new entrants may increase. OFFICE RENTS Growing demand as well as increased construction costs combined with the low availability of office space boosted the rental levels. Currently asking rents for top buildings stay at the level of EUR / sq m/month. However, in the light of the economic slowdown and with tough competition coming from Krakow and Wroclaw, lower rents should be an important factor in the developers strategies.

16 OFFICE COMPLETIONS (` sq m) OFFICE PRIME RENTS (EUR/ sq m/ month) 2 F LARGEST OFFICE BUILDINGS IN KATOWICE No 2 Silesia Tower Echo Investment Silesia Business Park CB Mikołowska Green Park Project Location Chorzowska Gornoslaska Chorzowska Mikołowska Murckowska Office Space (sq m),,, 2, 2, Centrum Biurowe Francuska Francuska 2, ING Bank Slaski Sokolska, Status U.Construction KATOWICE 2 Katowice Business Point Ściegiennego, U.Construction 2 Opolska 22 Opolska, Centrum Chorzowska Chorzowska, F 2

17 LODZ LODZ GENERAL OVERVIEW Lodz s advantage is an excellent central location in Poland as well as the third position in terms of population with a well-developed network of education centres. However, so far it has not taken advantage of a huge economic and labour potential, falling behind Krakow, Wroclaw, Poznan and Tri-City with respect to the economic performance. Currently, the network of roads and rail connections is insufficient. The situation should soon change as city authorities are actively working on attracting new investors and improving the infrastructure of Lodz. The Lodzka SEZ as well as consistent development strategy have already resulted in a number of new investors in the region such as: Dell, Gillette, Indesit, Flextronix and Procter&Gamble. LODZ - PIOTRKOWSKA OFFICE STOCK Modern office stock is usually developed in the City Centre area. The most attractive are Pilsudskiego, Piotrkowska, Dowborczykow and Sienkiewicza streets. Around % of modern office space in Lodz is located here including Orion and Lodzkie Centrum Biznesu. Some office buildings were developed close to Wolnosci square, at the north end of Piotrkowska, closer to Manufactura Shopping Centre. EUROPEJSKIE CENTRUM USLUG LOCAL ESSENTIALS MARCH 2 Population, Modern office stock in Lodz is estimated at around, sq m, the majority of which is located in speculative office developments. However, only % of this figure can be treated as A/B+ class, developed speculatively and for owneroccupiers. Only a few buildings have been constructed from scratch. The majority were refurbished or redeveloped by local landlords. A number of developers including GTC, Ghelamco and Echo Investments, have secured sites to develop prime standard office buildings. Currently a record volume of almost, sq m in eight projects is being constructed speculatively. The largest ones are University Business Park and Cross Point. Unemployment rate Average Gross Salary (EUR 2) Modern Office Stock (in sq m) Vacancy rate Prime rents (EUR/sq m/month).%,. % - OFFICE DEMAND Last years Lodz witnessed a high level of interest, predominantly from BPO investors as well as from local firms. They sought to take advantage of a number of grants and public help from the city. However, take-up in Lodz has been determined by a lack of quality office product. Take up in 2 reached its peak amounting to 2, sq m and doubled the demand recorded in 2. Currently, the situation is changing. The vacancy rate in Lodz has grown due to numerous projects entering the market. Currently, after the opening of Textorial Park (, sq m), it stands at around 2%. However, due to the global financial crisis and limited activity of new investors, the take-up in Lodz may remain low this year. OFFICE RENTS Prime rents stand at EUR.. /sq m/month for existing and planned buildings and we do not expect them to increase in the current year.

18 OFFICE COMPLETIONS (` sq m) LARGEST OFFICE BUILDINGS IN LODZ No Project Location Office Space (sq m) Status F 2 Centrum Biznesu OKAM University Business Park Aurus Synergia Dowborczykow Wolczanska Pilsudskiego Kosciuszki,, 2,, U.Construction To be expanded LODZ Cross Point Rydza Smialego 2, U.Construction OFFICE PRIME RENTS (EUR/ sq m/ month) ING Bank Slaski Textorial Park Kosciuszki Fabryczna 2,, 2 Red Tower Piotrkowska, 2 Orion Lodz Business House Sienkiewicza Zeligowskiego,, F 2

19 2 TRI-CITY TRI-CITY GENERAL OVERVIEW Tri-City is an urban area consisting of Gdansk, Gdynia and the tourist resort Sopot. It offers a well-developed business infrastructure and highly qualified labour force. However, when comparing the number of new investments, for a long time Tri-City has remained behind other regions in Poland. The situation may change once the major A South-North highway is completed. GDANSK OFFICE STOCK The modern office space supply in Tri-City is estimated at over, sq m with almost % located in Gdansk. Office space in Gdansk focuses primarily on three locations: Central Train Station with lower class, refurbished office high-rise buildings (Organika, Zieleniak), Wrzeszcz district (along Grunwaldzka St.) and Firoga district (in the vicinity of the Airport). The existing projects in Gdynia are larger and of higher quality. Office buildings are located along the main road leading to Gdansk Morska/Slaska/Zwyciestwa Streets. Smaller blocks are close to Swietojanska Street the city s high street. Business park facilities are being built along Luzycka Street. Currently there is around 2, sq m of office space under construction. The most important projects are being developed by Polish investors - Allcon, WAN, Centrum Zana and Invest Komfort. LUZYCKA OFFICE PARK LOCAL ESSENTIALS MARCH 2 Population, OFFICE DEMAND The demand in 2 was estimated at the level of, sq m. There are a number of occupiers who have secured their own accommodation, often in refurbished buildings which may have been driven by a lack of suitable space to let. These are typically banks and insurance companies (Prokom, Lotos, Nordea, Hestia). With the delivery of new space, the city gained more interest from international tenants such as GE Money Bank, Zensar, First Data and Compuware. Others, such as Reuters and Intel, are well established in the city. Unemployment rate Average Gross Salary (EUR) Modern Office Stock (in sq m) Vacancy rate Prime rents (EUR/sq m/month).%, 2,. % - The vacancy rate in all modern buildings in Tri-City, including owner occupied ones, stays at around %, generated mostly by vacant B class office space and recently delivered projects that are not fully leased. OFFICE RENTS Prime asking rental levels for high quality office buildings in Tri-City range between EUR and /sq m/month. We expect rents to stabilise, due to the uncertain economic situation and the great number of modern projects completed and in the pipeline.

20 2 OFFICE COMPLETIONS (` sq m) LARGEST OFFICE BUILDINGS IN TRI-CITY F No 2 Project Business Park Arkonska Tryton Lotos HQ Luzycka Office Park City Gdansk Gdansk Gdansk Gdynia Location Arkonska Jana z Kolna Elblaska Luzycka Office Space (sq m) 2, 2, 2, 2, Status Expanding Expanding TRI-CITY Mlode Miasto Gdansk Stocznia 2, OFFICE PRIME RENTS (EUR/ sq m/ month) CB Chipolbrok Hestia HQ Gdansk Sopot City Centre Hestii,, 2 Centrum Uphagen Gdansk Uphagena, 2 Prokom HQ Euro Office Park Gdynia Gdansk Podolska Armii Krajowej 2, 2, F 2

21 22 OFFICE INVESTMENT OFFICE INVESTMENT OFFICE INVESTMENT VOLUME In comparison to the previous year, 2 witnessed a significant slowdown in terms of investment activity. In total EUR. billion was invested in the whole country during the whole past year, over 2% of this volume, EUR. billion, was spent on office investments. In the first quarter of 2 there were only two transactions registered for a total of EUR million. OFFICE INVESTMENT VOLUME (EUR MILLION) BY LOCATION PRIME OFFICE YIELDS IN WARSAW AND REGIONAL CITIES (%) Warsaw 2 Warsaw 2 2 Regional 2 OFFICE TRANSACTIONS IN REGIONAL CITIES -2 (%) Krakow TriCity Poznan Wroclaw Katowice Lodz 2 2F Regional Cities Others Warsaw is still the main focus of investors. However, the number of regional office transactions is increasing and last year 2% of the total investment volume was concluded outside of the capital. Nine out of a total of 2 transactions took place in other cities. Wroclaw, Tri-City and Lodz are the leaders in terms of investments in the office sector. The most notable office transaction was the sale and lease back of the TPSA property portfolio by Baltic Property Trust for EUR million and the purchase of Marynarska Business Park by DEGI for EUR million with a yield of.%, rarely achieved in current and the end of last years market conditions. The largest transactions outside of Warsaw were concluded in Wroclaw - the purchase of Bema Plaza by DEKA for EUR million and Silver Forum by GE Real Estate for EUR million. In terms of investment volume 2 is expected to remain at a similar level to the previous year. The uncertainty of global economic conditions and the difficulty of obtaining financing has had a combined impact on limiting potential transactions. Vendor s price expectations should start to reduce in order to adjust to purchasers capability and demand. OFFICE INVESTMENT YIELDS Strong investment demand has been a common trend for the last few years. However the financial crisis has had a direct impact on yields. Prime office yields on the Warsaw investment market have increased to.% after a sharp compression over the last few years. In the regional cities since 2 prime office yields have compressed from % to the level of.2% at the end of the first quarter 2. EXAMPLES OF OFFICE INVESTMENT TRANSACTIONS IN 2-2 City Warsaw Warsaw Warsaw Warsaw Project TP SA Portfolio Marynarska Business Park Rondo (%) Atrium City Estimated Yield. %. circa.2 %.% EUR Million Tri-City Bema Plaza n/a Warsaw Arkonska Business Park A. % Warsaw Silver Forum.% Warsaw Jerozolimskie BP D circa. % 22 Warsaw Philips n/a 2 Purchaser Baltic Property Trust DEGI Macquarie GPA DEKA DEKA SEB GE Real Estate IVG Immobilien SEB

22 2 MARKET PRACTICE LEASE DURATION Leases can be set for a fixed or indefinite term. Fixed terms in new office buildings range from to years and between entrepreneurs - years. OCCUPANCY COSTS Rent Payment: rent is usually quoted net in EUR and payable in PLN in advance monthly or, very rarely, quarterly. VAT of 22% is payable on rents and sales in transactions between companies MARKET PRACTICE Rent Escalation: rents are subject to annual indexation to Euro - Zone or US CPI. Service Charges: include water, electricity, security, heating, air-conditioning, service, cleaning of common areas, taxes, insurance and all other maintenance and operational costs of the building and common areas. The tenant pays the landlord service charges, mostly quoted in EUR, and more and more often in PLN, as net plus 22% VAT. A typical service charge in an A-Class building in Warsaw ranges between EUR. /sq m and. /sq m/ month Car Parking: a tenant pays extra for the parking. A fee for a parking space would be around EUR - 2 per month depending on the building s location. Parking spaces are allocated according to a parking ratio. Depending on the location, the ratio may vary from space per sq m of leased office space in the City Centre to per 2 sq m out of the Centre Add-on Factor: calculated as a percentage of the space added to the net rentable area. These include lift lobbies, ground floor lobby, toilets available for all tenants and guests, rest areas and corridors etc. Market standards for the add-on factor in Warsaw are in the range of -%. Restoration/Reinstatement: tenants usually have no reinstatement obligations related to their premises. The landlord usually accepts the normal wear and tear of the leased area. Security Deposit: - months rent or a bank guarantee. Fit-out Contribution: The landlord gives the tenant the budget for the fit-out and finishes the space up to the assumed budget. Any additional expenses above the budget are covered by the tenant. TRANSACTION COSTS Acquisition Costs include notary fees (optional), registration duty (optional) and legal fees (although optional, legal assistance is highly advisable). Agency Fees: New lease: 2% of the annual rent, paid by landlord or tenant; VAT at 22% is additional. Usually it s.% (one months rent). Lease Renewal: -.% Rent-free Periods range from months, depending on the lease length, and the landlord s contribution to fit-out and other capital costs.

23 2 BUILDING STANDARDS BUILDING STANDARDS SUMMARY Warsaw Research Forum defined a list of standard requirements that the office buildings should meet. Class A office building should meet all basic standard specifications and a minimum of 2 out of optional specifications. Class B+ office building should meet 2 out of basic standard specifications and a minimum of 2 out of optional specifications. Class B office building should meet out of basic standard specifications and a minimum of 2 out of optional specifications. LOCATION. Good access and transportation (public transport, car-born users access). 2. A landmark recognized in a local context (brand name and visibility) - OPTIONAL.. Access to amenities (restaurants, cafeterias, shops). ELEMENTS OF BUILDING. Modern systems of heating, air-conditioning with humidity control and zone divisions not interfering with effective office space devices.. Suspended ceilings and raised floors (or possibility to install them).. Flexibility of internal design.. Modern high speed lifts.. Good daily light to the office space.. Representative lobby area - OPTIONAL.. Underground parking space with an appropriate ratio per office space within a submarket and with a direct access to/from an office building.. Visitors car parking places - OPTIONAL. 2. Pre-designed reinforced hardware area - OPTIONAL. BUILDING INFRASTRUCTURE. BMS (Building Management System) including a modern monitoring of a building and access control management.. Building infrastructure central control.. Central fire control.. Two or more telecommunication operators.. High-tech structured cabling (with three compartment trunking for telephones electricity and computer cable).. Multiple power supply with an automatic change-over. FITOUT. Floor carpeting - OPTIONAL. 2. Kitchen area - OPTIONAL.

24 SELECTED GENERAL LEGAL ASPECTS OF THE REAL ESTATE BUSINESS PREPARED BY HOGAN & HARTSON 2 SELECTED LEGAL ASPECTS GENERAL TITLES TO REAL PROPERTY Ownership title ( własność) provides for the broadest scope of rights to a real property in Poland. Certain properties located within cities owned by the State Treasury ( Skarb Państwa) or local-municipal authorities ( gminy) are subject to a perpetual usufruct ( użytkowanie wieczyste ). It is similar to ownership, but limited in time (usually years). Certain limitations to the scope of the right and use of a real property are imposed by the law or an agreement on its establishment. In addition to charges imposed on a property owner, a perpetual usufructuary is obliged to pay annual fees. PERMIT FOR ACQUISITION Acquisition of an ownership or perpetual usufruct title by certain foreigners (in essence entities from outside the European Economic Area) and relating to certain properties requires a permit of the Minister of Internal Affairs and Administration ( zezwolenie Ministra Spraw Wewnętrznych i Administracji ). The same applies to the acquisition of shares in companies holding such properties and controlled by such foreigners. A permit should be obtained before a real property is acquired, otherwise the acquisition will be invalid. STRUCTURE OF ACQUISITION For a real property sale agreement to be valid, it needs to be executed in the form of a notarial deed ( akt notarialny). This agreement can be preceded by the execution of a preliminary sale agreement ( umowa przedwstępna). The effectiveness thereof depends on whether or not it was signed in the form of a notarial deed. If so, an authorized party may demand conclusion of the final agreement and refer to the court to effect this. If no notarial deed was signed, only damages can be claimed. REGISTRATION SYSTEM In Poland, all basic information on the legal status (description, location, owner, encumbrances,) of a real property is contained is its land and mortgage register ( księga wieczysta), which is kept by the competent court. Entries in land and mortgage register are deemed factual and accurate. This so-called public credibility of land and mortgage registers gives protection to third parties relying on the land and mortgage register when acquiring in good faith a property from the person disclosed in the land and mortgage register. ZONING Zoning plans ( plany zagospodarowania przestrzennego) enacted by municipal authorities specify, in particular, the designation of development of the property and location of investments. Where zoning plans have not been enacted, a zoning decision ( decyzja o warunkach zabudowy) or a decision on location of public utility development ( decyzja o ustaleniu lokalizacji inwestycji celu publicznego) are issued. Special legal requirements apply to the majority of areas designated for agricultural or forestry purposes. 2 Hogan & Hartson

25 2 SELECTED GENERAL LEGAL ASPECTS OF THE REAL ESTATE BUSINESS PREPARED BY HOGAN & HARTSON SELECTED LEGAL ASPECTS GENERAL COSTS AND TAXES Transactions involving the purchase of real properties are subject to certain fees and payments, such as: (a) and notarial fees, which vary depending on the value of a property being acquired. A notarial fee may not exceed PLN, under any circumstances; (b) taxes ; generally, the sale of an undeveloped real property designated for development is subject to VAT. ( podatek od towarów i usług). The transfer of buildings is, in principle, not subject to VAT ; however, there are numerous exceptions that apply in practice. Taxpayers may relinquish the VAT exemption under certain circumstances. The tax on civil law transactions ( podatek od czynności cywilnoprawnych), of which the rate is 2% of the market value of the property, will be charged instead if the VAT exemption applies. DEVELOPMENT CONSTRUCTION PERMIT Except for limited construction works that are subject to notification to the relevant authorities, the performance of construction works requires a final construction permit decision ( ostateczna decyzja o pozwoleniu na budowę). A lack thereof entitles the authority to order the demolition of a building/structures, unless a legalization procedure ( procedura legalizacyjna) is allowed. A construction permit expires when, within three years of the date on which it becomes final, construction works have not yet commenced or have been suspended for more than three years. An amendment to the Construction law ( Prawo budowlane) is currently being prepared. The purpose thereof is to simplify the investment process by, among other things, waiving a construction permit requirement in certain circumstances. ENVIRONMENTAL CONDITIONS DECISION Performance of works that may have a significant impact on the environment and the so-called Nature 2 area is allowed after a decision on environmental conditions ( decyzja o środowiskowych uwarunkowaniach) has been obtained. In certain circumstances, an investor must prepare a report on the predicted impact of its development on the environment. The issuance of a construction permit is conditional upon obtaining this decision. ADMISSION FOR USE Generally, in order to start using the object, an investor needs to notify the relevant authorities about its completion. If the authorities have no objections to the development performed, the building may be used. For some types of buildings, an occupancy permit ( pozwolenie na użytkowanie) is obligatory. In accordance with the proposed changes to the law, a different administrative procedure will apply to allow the occupation of buildings. From January, 2, a certificate related to the so-called "energy characteristics" of every building being admitted for use is required. 2 Hogan & Hartson

26 SELECTED GENERAL LEGAL ASPECTS OF THE REAL ESTATE BUSINESS PREPARED BY HOGAN & HARTSON 2 COMMERCIAL LEASES LENGTH The maximum term of a lease for a defined period of time is years and between entrepreneurs - years. If after expiry of such term the lease is continued, it is regarded as concluded for an indefinite period of time. Leases entered into for an indefinite period ( czas nieoznaczony) of time may be terminated by either party upon an agreed termination notice, or, in the absence of the respective contractual provision, upon statutory notice (usually three months). Leases entered into for a definite period ( czas oznaczony) of time may be terminated only for reasons specified in the agreement or in law. SELECTED LEGAL ASPECTS RENT STRUCTURE In commercial leases, 22% VAT is added to the rent. Indexation of the rent is provided in most of agreements, usually pursuant to the Eurozone CPI index. In commercial leases, a turnover rent is often applied and is due as a percentage of the tenant's turnover. Since January 2, entrepreneurs may denominate obligations and effect payments also in any other currencies agreed. Before, payments (including rent) could be denominated only in the Polish currency ( Polish zloty). LEGAL FORM A lease agreement for a period longer than one year should be concluded in writing, otherwise being regarded as entered into for an indefinite period of time. The law allows the purchaser of the property that is let, to terminate the lease. In order to secure tenants against such termination, it is advisable to sign leases for a definite period of time with a so-called certified date ( data pewna). ABOUT HOGAN & HARTSON Hogan & Hartson is one of the world's leading law firms representing real estate companies and real estate investment trusts (REITs). In Poland, the firm has been serving the business community since, and has a team of Polish advocates, legal advisors, and U.S. lawyers with broad experience in large and complex transactions and projects. Consequently, the firm is able to provide its clients with the full range of commercial and litigation services, and has been involved in some of the country's largest investments. Maciej Jamka Managing Partner Hogan & Hartson Jamka sp.k. al. Jana Pawła II 2 - Warszawa mjamka@hhlaw.com DISCLAIMER2 Hogan & Hartson The above review has the nature of informationonly and was not preparedto serve as groundsfor businessdecisionsin specific circumstances. 2 Hogan & Hartson

27 Charles Wardroper Managing Director T + 22 F + 22 Karol Klin Office Agency karol.klin@cbre.com T + 22 F + 22 Joanna Mroczek Research & Consultancy joanna.mroczek@cbre.com T + 22 F + 22 CB Richard Ellis Polska Rondo ONZ -2 Warsaw Poland T + 22 F