Economic snapshot

In March, the Polish government introduced many restrictions in order to fight the spread of the coronavirus pandemic. Due to the development of the epidemic, they have been extended until at least 19 April. Restrictions which have a major impact on the Polish economy and real estate market include the following:

• Full lockdown – people are banned from leaving their homes except for essential reasons (including going to work, buying the essentials, visits to doctors or walking dogs).
• Air traffic is suspended and borders remain closed for foreigners until at least 3 May.
• The operation of shopping centres sized above 2,000 sqm is limited to stores selling essentials or providing essential services, including grocery stores, pharmacies, drugstores and dry cleaners.
• Restaurants are only allowed to offer delivery or takeaway meals.
• Standalone DIY markets remain open, except for weekends.
• The limitation on the number of people present at the same time in shops and supermarkets - up to 3 people per cash desk.
• Hotels and other accommodation places, as well as beauty and hair salons, remain closed.
• A distance of one and a half metres has to be maintained in workplaces as well as disinfectants have to be provided.

Other restrictions:

• Social distancing in public places - an obligation to maintain a distance of at least two metres between pedestrians.
• Schools and kindergartens remain closed until at least 26 April.
• People are not allowed to use parks, beaches or boulevards. City bike rentals are closed.
• Public transport is limited to one passenger per two seats.
• All museums, libraries as well as entertainment and cultural facilities remain closed.
• The obligation to cover the nose and mouth in public from 16 April.

According to the latest announcements, the Polish government is planning to ease some restrictions in order to gradually unfreeze the economy. As at 16 April, the first phase, which will take effect on 20 April, will include increasing the number of people allowed in stores at the same time and permitting access to forests and parks and outdoor recreational activities. The second phase foresees the opening of DIY stores at weekends, as well as hotels and other accommodation places, and some cultural facilities. The third phase will include the opening of stores in shopping centres, F&B facilities, beauty and hair salons, while the fourth phase will see the opening of gyms, fitness clubs, massage salons and solaria, and cinemas and theatres. The dates for moving forward to the next phases have not been given yet and will depend on the spread of the coronavirus.

According to Oxford Economics, the introduction of severe containment measures against the coronavirus will cause significant disruption to the economic activity in Poland in H1 2020, but a strong recovery is forecasted in H2 2020. As a result, Poland’s GDP will broadly stagnate in 2020, rising just 0.1% (a 3% cut from our pre-coronavirus forecast), whereas in 2021 the recovery could show growth picking up to 4.4%.

Retail sector

As a result of the restrictions in place, shopping centre landlords, tenants and the entire retail sector is suffering major losses. Changes to the retail landscape will depend on the length of the pandemic and the national lockdown. As customers stay away from stores and public places, retailers being able to complete online orders through home delivery are considered as beneficiaries.

Poland has introduced an ‘anti-crisis shield’ according to which lease agreements in shopping centres could be temporarily suspended for stores that are not allowed to operate provided that the landlord receives a binding offer from a tenant to extend the lease agreement for the duration of the ban plus another 6 months. Additionally, the Sunday trading ban is going to be partially lifted, allowing stores to be stocked on Sundays.

Both tenants and landlords are taking initiatives to take advantage of the new regulations. Cooperation and partnership of both parties is essential to confront the current challenges.

Office sector

Office buildings in Poland remain open. However, due to the government regulations regarding keeping a distance between workstations of at least one and a half metres, fewer people are allowed to work in offices. As a result, and taking into account additional safety measures adopted by individual companies, a large part of office-based employees in Poland are currently working remotely.

There is no legislation limiting construction works in Poland and most office construction sites continue. Nonetheless, due to the permitting processes slowdown and other pandemic-related obstacles, some office projects planned for completion over the next few months are likely to be slightly postponed.

Key statistics for the Warsaw office market in Q1 2020 are positive as the total leasing activity reached a level similar to that in Q1 2019, which pushed the capital’s vacancy rate down further. The ongoing activity on the office market is, however, being affected by the pandemic as a substantial number of tenants have adopted the wait and see strategy and some have already put their relocation decisions on hold.

Additionally, some office buildings tenants have had to close their premises as a result of the governmental restrictions. This applies to service providers such as cafés, canteens, fitness clubs, language schools, hairdressers, beauty salons, etc.

We are also seeing a growing number of office occupiers asking landlords for rental payment reductions or freezes. However, as the Polish government has not declared a state of emergency which could allow market players to take advantage of force majeure clauses, the most optimal way for both landlords and tenants is mediation and agreeing solutions that would satisfy both parties.

Coworking operators are also suffering from weaker demand. Cushman & Wakefield’s experts believe that they may, however, benefit from a rebound when the pandemic is over as a majority of companies will most probably adapt and extend their strategies regarding space utilization by flexible office spaces and remote work.

Warehouse sector

The situation on the warehouse market in Poland remains relatively stable. Adjustment processes currently dominate - securing the health of employees and adjusting levels of inventories in order to secure the liquidity of supplies, especially in terms of essential product groups. Cushman & Wakefield expects take-up in Q1 2020 to remain positive, powered by the robust occupier activity in the period preceding the pandemic outbreak in Poland.

As the occupier market is quite diversified, the further COVID-19 impact will depend on the tenant category. Tenants who are currently affected the most include retailers and automotive industry companies. However, on the other hand, there are couriers seeing the number of parcel services exceeding the pre-Christmas period and occupiers active in online channels who have also increased their sales. Some of these trends are short-term, but some will also continue after the lockdown.

We anticipate that the construction works started at the beginning of the first quarter of this year will continue. Currently, there is over 1.9 million sqm of warehouse space under construction in Poland, a large part of which is under lease negotiations. Speculative investments account for about 40-50% of the new development pipeline.

According to the experts of Cushman & Wakefield, developers will most probably rethink their development plans, especially with regard to speculative investments, due to the uncertainty regarding the situation in the future and the expected economic slowdown. Some processes, especially in the short-term, may be suspended and companies will be carefully watching the market. At the same time, entities that have made strategic decisions on long-term investments will not discontinue projects to maintain financial liquidity.

Cushman & Wakefield forecasts

As the current situation is developing rapidly, it is difficult to exactly predict the impact the COVID-19 pandemic will have on the property market in Poland.

The retail sector will definitely suffer the most and therefore cooperation between landlords and tenants is key. Additionally, all market players should already start rethinking their strategies and adjusting to the post-pandemic reality.

The strong fundamentals of the office sector in Poland, coupled with no risk of oversupply and low vacancy levels, should enable the market to regain the balance relatively quickly after a slowdown.

Thanks to very strong fundamentals, the Polish warehouse market is likely to maintain its growth momentum in the long run. Today’s customers’ switch to the online mode will translate into their subsequent behaviour, which will, in turn, have a positive impact on demand for warehouse space. Another catalyst for further growth could be the relocation of some production from Asia to Europe and the desire to keep it here, closer to places of consumption. This is a great opportunity for the CEE region, which remains competitive compared with Western Europe in terms of rental rates and labour costs.