Abstract
A host of leading indicators give good reason to believe that the business
cycle in Poland will reach its
lowest point during Q209-Q309. Given the
relatively strong Q408 outturn (2.9% y-o-y) and with
consumer sentiment
only appearing to take a bruising in February-March, first-quarter data may
still
report positive economic growth. However, we have long maintained
that the Polish economy has been
running six to nine months behind the
eurozone (in economic as opposed to financial terms), and as such,
though
our global outlook projects a trough in H109 for most developed economies, we
believe that the
most severe decline in Polish growth will likely occur
during Q209-Q309. Moreover, for the time being,
we hold to our bearish
out-of-consensus -2.7% real GDP growth forecast for this year.
Given that
consumer spending has remained the driving force of the Polish economy,
accounting for
nearly 80% of nominal GDP in 2008, reining in household
expenditure is key to dampening the economic
cycle. To this end, the
latest labour market data and sentiment indicators further suggest that the
worst is
yet to come in Q209-Q309. The unemployment rate surged to 11.2%
in March (the highest rate of
joblessness since February 2008), while real
wage growth continued its decline since the beginning of
2008.
New
development in Poland has been arrested by the lack of available finance and
uncertainty of demand
in the harsh new economic climate. Approval from the
risk-averse banks is now a critical factor in project
success. CB Richard
Ellis observes that recent projects have been hastily completed and are
not
compatible with the ‘flight to quality’ trend. Pre-leasing
and the best locations will be required to secure
project funding.
High-quality, well positioned projects started this year will complete in time
to take
advantage of the expected economic recovery.
Prime office
rentals in Warsaw were EUR27 per square metre per month (m2/month) according
to DTZ
Research, down from a high of EUR30m2/month the previous quarter.
DTZ expects the figure to level out
at EUR22sq m/mth around mid-2010. Take
up of 450,000 in 2008 is expected to fall to under 50,000 this
year, based
on Q109 figures. However, availability is expected to remain low at around 4%
because of
sharply reduced new supply. CBRE estimates prime office rentals
at between EUR14m2/month to
EUR18m2/month in the best buildings in other
cities. The tendency seen in other markets for landlords to
offer
incentives and attractive leasing terms to retain and attract tenants is not
so pronounced in the Polish
office market, because of the tight
availability situation. Almost 50% of the total take-up last year was in
the form of pre-lease agreements, say CBRE, as large spaces needed by big
companies are otherwise not
available.
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