Vacancy rate up despite strong occupiers’ sentiment in Warsaw. High construction activity in the major office markets in Poland
Summary:Jones Lang LaSalle summarised the office market data and trends in Warsaw and the other main Polish cities after Q3 2012. Below are key facts from the latest report:
- Demand: Occupiers’ sentiment in Warsaw remains strong with more than 157,600 sq m (123,250 sq m net) leased in Q3 2012 and a total of 455,300 sq m so far this year (15,000 sq m more than in the corresponding period of the record-breaking 2011). 41% (64,500 sq m) of entire registered take-up in Q3 constituted of pre-lets, while lease renewals had only 22% share. The largest pre-lets in Q3 included: Poczta Polska (12,600 sq m, Domaniewska 37c, Mokotów), GDDKiA (11,700 sq m, Green Corner developed by Skanska, City Centre) and Dalkia (5,900 sq m, in Plac Unii, Mokotów). Q3 2012 saw also some lease renewals including Generali (7,700 sq m, Marynarska Point, Mokotów).Almost 95,000 sq m was leased in major office markets in Poland in Q3 2012, with Wrocław, Kraków and Katowice clearly leading in occupier activity. So far this year 270,000 sq m was leased, up 20% on last year. Five out of ten major lease transactions (over 2,000 sq m) were concluded in Wrocław: Nokia Siemens Networks (a new/pre-let of 14,420 sq m in Green Towers A&B and renewal/expansion of 8,800 sq m in Bema Plaza), Google Poland (renewal of 5,500 sq m also in Bema Plaza), Geoban (renewal of 2,200 sq m in Kameleon) and a company from financial sector (a pre-let of 10,050 sq m in Green Day). Other major signed agreements included: Unilever – UltraLogistik (a pre-let of 5,400 sq m in Nowe Katowickie Centrum Biznesu, Katowice) and Bayer SSC (a pre-let of 2,300 sq m in Olivia Tower, Tri-City). Interestingly, in Q3 2012 more than 35% of concluded transactions were pre-lettings.
- Supply: More than 148,100 sq m of office space was delivered in the first three quarters, with 56,100 sq m of that space coming in Q3 2012. The South-East office district saw two new office completions within Wilanów Office Park, including a building delivered for Asseco and the B3 office block, both totalling approximately 29,500 sq m. The City Centre saw one new completion – Senator (23,250 sq m) developed by Ghelamco. It is estimated that Q4 will see up to 120 000 sq m of new deliveries (of which 41% is pre-leased).Q3 2012 brought almost 73,400 sq m of new office space to the market outside of Warsaw. 68% of new completions were delivered in Kraków (Enterprise Park A&B - 15,100 sq m and Green Office C - 10,000 sq m), Wrocław (Promenady Wrocławskie –Epsilon - 6,000 sq m and West Business Centre - 2,850 sq m) and Szczecin (Baltic Business Park A - 7,000 sq m and Brama Portowa I - 4,000 sq m). Other new major completions to the market were: OPERA Office (7,600 sq m) in the Tri-City, or Okraglak (6,750 sq m) in Poznań. In the first three quarters of 2012 the total new supply amounted to 138,000 sq m and was 170% higher comparing to the same period in 2011. Currently, 510,000 sq m of office space is under active construction in the major cities in Poland (excl. Warsaw), of which 174,600 sq m is likely to be completed in Q4 2012 (40% of which is already secured with pre-let agreements). The majority of currently commenced projects can be found in Wrocław, the Tri-City and Łódź.
- Vacancy rates: At the end of Q3 2012, 8.1% of the modern office stock in Warsaw remained vacant. The vacancy rate is in an upward trend and due to large volume of office space in the pipeline, the market is expected to see a further upward pressure on this ratio in Q4 2012 and especially in 2013. Quarterly vacancy rates remain stable in Kraków and Łódź, whilst a decrease was seen in Lublin. Other major office markets in Poland have recorded an increase in the vacancy level. This growth is attributed to the delivery of new office space, where the commercialization process has not yet been completed.
- Rents: Prime headline rents in Warsaw and other major Polish cities remained stable when compared to the end of 2011. Prime office space in Warsaw City Centre now fetches between € 22 and € 25 / sq m / month. Prime headline rents currently range from €11 to €13 / sq m / month in Łódź up to €16 / sq m / month in Poznań.
Tomasz Czuba, Head of Office Leasing at Jones Lang LaSalle, comments: “Office space demand continues to be strong and we do not observe any symptoms of slowdown. However, the supply aspect should be closely monitored. We estimate that Q4 2012 will see up to 120 000 sq m of new deliveries in Warsaw and another 300,000 sq m in 2013. This substantial amount of new office space will have an influence on the vacancy rate in Q4 2012 and especially in 2013. High pre-let activity does not have an immediate impact on the absorption of the office space, however, it may soften the increase of the vacancy rate within the next several months”.