Warsaw

Office Market Profile:
Poland
Q3 2014
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Warsaw
In Q3, tenant demand stood at approximately 163,000 m2, against
the 422,000 m2 seen in the whole of 2014. The Upper South
followed by the South West and the Fringe were the leading districts
in this respect and generated more than 75% of all demand in the
capital in Q3. New transactions amounted to almost 115,000 m2 of
leased space, including a modest volume of expansion transactions
(7,900 m2) across the entire city. Pre-letting activity has sharply
accelerated compared to Q2, accounting for almost 20% of all
registered take-up. However, it was mainly driven by planned
Raiffeisen’s relocation to Prime Corporate Center (19,500 m2 space
leased), which was the largest deal in Q3. Other notable
transactions were Media Saturn Holding’s renewal in Blue City
Offices (8,000 m2) and Moneygram’s new deal in the Konstruktorska
Business Center (7,300 m2). Two of the other biggest transactions
were by public sector institutions: Główny Inspektorat Transportu
Drogowego in Equator I and Urząd Lotnictwa Cywilnego in Flanders
Business Park A (a 7,100 m2 new deal and a 6,600 m2 renewal)
which shows the increasing interest from this sector in leasing the
best quality office space in Warsaw.
In Q3, prime headline rents remained stable; however, we expect
developers to revise their rental policies next year in response to
increasing vacancy and the influx of new completions entering the
market in 2015. Currently, the prime headline rents in Warsaw City
Centre range between €22 and €24 / m2 / month, the best NonCentral locations (Mokotów is a benchmark) are between
€14.50 and €14.75 / m2 / month.
In Q3, the total modern office stock amounted to almost
4,365,000 m2 and looks set to outperform the levels from 2013,
when 300,000 m2 was delivered to the market. This has not,
however, deterred developers, who have announced completions of
another 90,000 m2 in Q4 2014, some of which will probably be
postponed until early 2015. At the moment, almost 60,000 m2 of
office space is under refurbishment and almost 640,000 m2 in the
construction stage across the city (almost 20% of which is already
pre-let). Q3 alone saw the completion of four office blocks: Warsaw
Spire B (20,000 m2) and Małachowskiego Square (12,000 m2) in the
City Centre; Fringe and Nimbus (19,000 m2) in the South-West; and
Garden Plaza (8,500 m2) in the North.
Source: JLL, WRF, Q3 2014, F-forecast
This quarter the vacancy rate has increased to the level of 13.8%,
indicating an ongoing upwards trend. Cooling demand combined
with increasing supply will soon trigger a sharper increase.
Office Completions, Future Supply and Vacancy Rate
m2
400,000
16%
300,000
12%
200,000
8%
100,000
4%
0
0%
Completions (m²)
Planned - Occupied (m²)
Planned - Vacant (m²)
Vacancy rate
Prime headline rents in Warsaw (€ / m2 / month)
35,00
30,00
25,00
20,00
15,00
10,00
2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F
City Centre
Source: JLL, Q3 2014, F-forecast
Non Central (Mokotów)
Major Office Markets
(outside Warsaw)
In Q3, approximately 117,000 m2 of modern office space was leased
in the regional office markets (a total of 320,000 m2 in Q1-Q3).
The biggest transactions in Q3 were the 21,000 m2 renewal and
expansion by Infosys in Green Horizon in Łódź, a 16,400 m2 pre-let
in Dominikański in Wrocław by HP GBC and the renewal of almost
4,400 m2 in Diamante Plaza in Kraków by AON Hewitt. As a result of
such large deals Łódź has already exceeded last year’s total take-up
by 95% and 2014 is set to be record-breaking for the city in terms of
demand. Kraków once again shows stable and strong take-up
volumes, which are already greater than in the whole of 2013.
Total demand in regional markets overall for the first three quarters
of 2014 accounts for 88% of last year’s demand.
The first three quarters of 2014 brought more than 206,000 m2 of
new office space to the market outside Warsaw. Almost 40% of the
new supply that entered regional markets was delivered in Kraków
(81,500 m2), with the Tri-City accounting for another 46,000 m2 and
Katowice 27,000 m2. In Q3, three largest well-leased projects were
completed in Kraków: Kapelanka A (17,300 m2 – 65% let),
Enterprise Park C (13,600 m2 – 95% let) and Quattro Business
Park D (12,200 m2 – 80% let).
Developer activity remains strong in Poland’s major cities: currently
more than 520,000 m2 of office space is under active construction.
Interestingly, a large proportion of this volume consists of large office
building with an area of more than 20,000 m2. Together Wrocław,
Kraków and the Tri-City account for 64% of all projects. Wrocław is
taking a clear lead in this respect, with almost 137,000 m2. The
largest project is being developed in Poznań: Business Garden
Phase I (39,000 m2). Pre-let levels of projects under construction in
Poland’s major office markets range between 12% in Poznań to 34%
in Łódź and nearly 50% in Wrocław.
Quarterly vacancy rates varied across the markets. Wrocław,
the Tri-City, Poznań and Łódź remained stable, while Kraków and
Katowice recorded slight increases in vacancy (1.5pp and 2.3pp
respectively). The largest fall in vacancy was in Szczecin (6.7pp),
while the rate fell by 4.7pp in Lublin and stood at 8.6% at the end of
the quarter.
Despite the changes, Kraków still registers the lowest vacancy rate
(6.0%) and Szczecin the highest (17.7%).
Prime headline rents in regional cities currently range between €11
to €12 / m2 / month in Lublin and €14 to €15 / m2 / month in Wrocław
and Poznań. Average headlines rents remain highest in Kraków
(€13.5 to €14 / m2 / month) and Katowice (€12.5 to €13.75 / m2 /
month) and lowest in Lublin (€10 / m2/ month).
There is no common picture for all the major cities outside of
Warsaw in terms of both rents and vacancy. One large lease
agreement can still change the balance on a given market. Due to
such a change Łódź saw one of the lowest vacancy rates in the
history of the city.
Stock and Vacancy Rate
m2
Stock (LHS)
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Vacancy Rate (RHS)
17.7%
13.1%
10.4%
JLL
Anna Młyniec
Head of Office Agency
and Tenant Representation,
ul. Królewska 16
00-103 Warszawa
Tel. +48 22 318 0000
Fax +48 22 318 0099
[email protected]
Mateusz Polkowski
Associate Director
Research & Consultancy
ul. Królewska 16
00-103 Warszawa
Tel. +48 22 318 0042
Fax +48 22 318 0099
[email protected]
www.jll.pl
www.jll.pl
16%
12.0%
9.8%
8.7%
12%
8.6%
6.0%
8%
4%
0%
Under Construction
m2
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Under Construction - Vacant
Under Construction - Occupied
Prime Headline Rents (€ / m2 / month)
Wrocław
Poznań
Kraków
Katowice
Tri-City
Szczecin
Łódź
Lublin
10
11
12
Source all charts: JLL
JLL
20%
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