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Who will benefit from the metro line? Office buildings vs. flats

6 September 2018

An efficient underground rail system is a major advantage of any metropolis. Easier access to selected city areas, transfer stations and stops, reduced travel time, greater comfort, less vehicular traffic, less smog: it’s a win-win situation for all. It is no surprise that the discussion on the expansion of the Warsaw metro network kindles imagination, makes people think and provokes discussions, especially in the context of the upcoming local government elections. Who will benefit the most from the new metro stations?

Information about the commencement of construction of the second metro line (M2) in 2016 triggered a positive reaction of both residents of Warsaw as well as developers. It is a well-known fact that having a metro station nearby is a competitive advantage that beats all others. The reaction to the news that the line will be extended in both directions was even stronger. It was particularly appreciated by residential developers: the farther from the city centre, the easier it is to acquire land.

Magnet for new investments

In the past three years of existence of the second underground metro line (2015–2017), the surrounding areas have been developing rapidly, both in terms of new residential buildings and as well as office buildings. As in the case of magnet poles, development on both sides of the Vistula has also undergone polarisation. Connecting the left and right parts of Warsaw with a metro line caused, on the one hand, the shifting of business centres from the core centre to the west, and on the other, made residential development in Praga Północ gain significance.

Commercial projects with complementary housing development dominate in the area of the Rondo Daszyńskiego and Rondo ONZ stations, while Dworzec Wileński and Stadion Narodowy serve mainly people already living there, while the office function is of lesser importance. The development of areas near the metro lines is a natural extension of the existing development. The central business area has always been the core city centre of Warsaw, and such locations as Mokotów-Służewiec or the Aleje Jerozolimskie route. Office investments on the right bank of the Vistula have a marginal share in the existing office supply (about 4–5%) and, contrary to the expectations of urban planners and the local government, this share is not expected to increase significantly in the near future.

Shire in Praga, Mordor 2.0 in Wola?

Over the past three years, approximately 3,800 flats have been completed in the immediate vicinity of the seven functioning metro stations of the second metro line. Another 3,400 units are currently under construction and are expected to be completed in 2018–2020. To compare, 2,200 dwellings were completed in 2012–2014, when the metro line was being constructed in the area in question.

In terms of the number of completed premises located in the immediate vicinity of the metro line, Praga Północ is the unquestionable leader. Residents of almost 90% of the new project in the past three years only need to walk up to 10 minutes to a metro station.

In the case of office projects, new rentable space is still under construction, as these projects take much longer to complete. In 2015–2017 about 320,000 m² of new offices were completed, and the completion of another 700,000 m² is planned for the next four years. About 50% will be located in the immediate vicinity of the Rondo Daszyńskiego metro station. The pace of development of this area is spectacular. In a few years, the office space offer in this area will come close to the total existing office space in such cities as Łódź, Katowice or Poznań (about 550,000 m²).

The closer, the more expensive

For developers, proximity of a metro station does not only guarantee fast commercialization of the project. It also offers a bit more freedom in setting prices, both as regards the prices of residential units for sale as well as rents in office projects. As at the end of Q2 2018, the average prices of flats on offer in the districts crossed by the second metro line are: PLN 10,600 per m² in Praga Północ, PLN 27,400 per m² in Śródmieście and PLN 11,000 PLN per m² in Wola. However, in the case of projects located near metro stations, buyers need to pay a lot more. The biggest differences are visible in the Wola district, where the asking prices in the analysed projects amounted to around PLN 15,800 per m², which is 44% more than the average for the district. It is worth to note that apart from the metro line, the proximity of the city centre and the uniqueness of analysed projects are the most important here. In Śródmieście it was about 30% more. The average asking price in the analysed projects was over PLN 35,700 per m². Such high prices are mainly driven by the considerable share of apartments in the offer, especially in the unique Złota 44 project. As at the end of Q2 2018, flats in projects located near metro stations in Praga Północ were more expensive by 8% than the average asking price in the district. In the case of this district, it is important to note that as many as 62% of the units on offer are located near the existing metro stations, and another 35% are located near the new Szwedzka metro station.

What can we expect when subsequent metro stations are completed?

We already know the schedule of works needed to complete the second metro line, and deadlines are the only parameters that can change. Currently, six more stations are under construction, three in each direction. They are scheduled for completion in late 2019. The further the metro moves away from the centre, the higher the share of residential buildings in the immediate vicinity of the planned stations. There are currently about 1,300 units already under construction. Examples of office projects that deserve a mention are the Wola Retro complex at Skierniewicka Street, and the multifunctional Bohema project at Szwedzka Street. Also noteworthy is the concept of further development of Port Praski, where the new office ‘City’ is to be constructed next to the Stadion Narodowy metro station. The purpose of undeveloped land intended for commercial development is to enliven this part of the city and create new jobs close to the place of residence, so that the development structure of the district is more diverse.

The metro stations that are under construction and planned are already strongly affecting the prices of residential units on offer. Currently, most investments are being constructed on the right side of the Vistula at Szwedzka Street and Trocka Street, and near the Płocka station in Wola. The prices of these units start at PLN 7,500 per m² and reach almost PLN 14,000 per m².

In a few years, the metro line will reach Chrzanów and Bródno, where developers are competing for the best investment land. However, these are only remote plans at this point. It is important to stress that there are still undeveloped plots within the reach of the existing stations of the second metro line that will become even more important in the coming years, among all the land at Syreny Street or a part of the area formerly occupied by the Sarmata sports club at Płocka Street. One can also expect old buildings to be demolished. For example, the former AlmaMer school building near the Płocka metro station is a perfect candidate.