The Business Process Outsourcing sector opens up prospects for the city

Warsaw, 4 September 2013
According to a report on the Szczecin commercial real estate market, developed in cooperation between Szczecin Town Hall and CBRE, the world’s largest commercial real estate services company, Szczecin has enormous potential for attracting new investments. Although historically Szczecin is an industrial city, nowadays it is geared mainly towards the modern Business Process Outsourcing sector (BPO) and high tech industries such as renewable energy or biotechnology. Modern office space, a key factor taken into consideration by companies contemplating the relocation of their business processes to a given city, is enjoying visibly growing demand in Szczecin.

Joanna Mroczek, Head of Consultancy and Research, CBRE in Poland:
“The forecasted increase of foreign investment in the business services sector, together with improving investor confidence in the city connected with the new, business-friendly direction of local government policy, mean that Szczecin has great potential to be ranked among major European business and cultural centres. A substantial and well qualified labour force coupled with a convenient location in close vicinity of the German border are the city’s key assets. We expect that the BPO and R&D sectors in particular will generate employment growth in Szczecin.”

The office market and the BPO sector
Total modern office stock in Szczecin is estimated at 145,000 sqm with an increasing share provided by class A buildings. There are currently five office projects under construction with a total area of over 60,000 sqm to be delivered in 2013-2015, and there are plans to construct a further 200,000 sqm. Prime rental rates are around EUR 14/sqm/month. On average, taking into account class B premises, rates are EUR 10-12/sqm/month. The vacancy rate in Szczecin in 2013 was 13.6%, due to the fact that almost 18,000 sqm office space has been delivered to the market. In 2011 and 2012 the vacancy rate was around 8%.

Daniel Bienias, Head of Tenant Representation and BPO Services, CBRE in Poland:
“The growth of vacant office space creates a privileged position for tenants, meaning they are able to choose from a wider selection of available premises and have the opportunity to negotiate better terms on their lease. However, relatively high tenant activity combined with a growing number of investors interested in the market should lead relatively quickly to the absorption of vacant space.”

There are over a dozen companies from the BPO sector in Szczecin including Bertelsmann, Genpact, Metro Services, Unicredit Business Partner and Home.pl. Demand for modern office space in Szczecin is generated mainly by foreign investors with some input from local companies. The most active tenants come from the IT and banking sectors as well as the SSC/BPO segment of the market. The largest lease contracts in Szczecin were signed by Unicredit, BLStream and Genpact. In the first half of 2013 the biggest office (2,400 sqm) was leased by Home.pl in the new Lastadia office building. CBRE took part in the transaction.

Retail market
The modern retail offer in Szczecin is very varied and includes shopping and outlet centres located throughout the city, retail premises situated along major routes in the city centre, as well as residential shopping centres, discount and DIY stores and supermarkets. Currently under construction is the Marcredo Szczecin retail park with 14,000 sqm. There are also plans to extend the Galaxy shopping centre (17,000 sqm) and Aleja Slonca shopping centre (35,000 sqm). The vacancy rate has been low over the past few years, at 1-2%, which reflects the high demand for retail space in Szczecin.

Prime retail rates are EUR 40-45/sqm/month. Rental rates for premises situated along the city’s high street are more diversified, mostly due to varied fit-out standards and ownership structure and range between EUR 25 and 40/sqm/month.

Magdalena Frątczak, Director – Retail, CBRE in Poland:
“The city is a popular shopping destination with Germans, which increases its attraction among retail chains. The density ratio of modern retail space in Szczecin is about 600 sq m per 1,000 residents, whilst average density measured for the seven largest cities in Poland stands at about 730 sq m/1,000 residents, which puts the city at the lower end of the scale.”

The warehouse market
Szczecin is one of smallest logistics and warehouse markets among the country’s largest agglomerations. The local warehouse region is situated a relatively long way away from the A2 highway connecting Berlin and Warsaw, thus the warehouses serve mainly the local market. The region is exceptionally attractive in terms of logistics, since it is conveniently located close to the German border and to Scandinavian countries and offers sea connections. Industrial stock amounts to nearly 50,000 sqm while the vacancy rate is close to zero.

Aleksander Kuźniewski, Senior Property Negotiator, Industrial and Logistics at CBRE in Poland:
“Until recently companies looking for warehouse space were forced to buy or even build their own logistics properties. The recently built North-West Logistic Park was 100% leased from the start, part of that even before construction had been completed. Such a situation indicates that there is unmet demand for quality warehouse space. There is a large area to be developed along the S10 express road or West Pomeranian Logistic Centre of around 20 hectares located in the former Port Szczecin. Nevertheless no new plans for such developments have been announced.”

Effective rents range between EUR 2.50-2.90/month/sqm. The rates are competitive in relation to other Polish regional markets and might encourage tenants to locate their resources in schemes situated the region.