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Colliers International, a commercial property market consultancy, presents the results of the most recent report on the situation of the office space market in Warsaw and on regional markets.
WARSAW
After the activity on the Warsaw office space market dropped in the second quarter, the demand has significantly risen over the last three months, even though 25% of this figure was due a single lease agreement being renegotiated. The vacancy rate remained flat for the last half a year. Also the rents stayed almost unchanged.
In the third quarter of 2010, the supply in Warsaw only inched up 15,000 m2. Three buildings were commissioned: Uniqa Forum and the second stage of the CTA Plaza in the South-West zone (Ochota/Włochy) as well as the head office of Juwentus in the Lower South zone (around Puławska St.). There are currently over 233,000 m2 of office space under construction, of which between 43,000 and 55,000 m2 are to be commissioned in 2010. This will include, inter alia, the Zebra Tower (17,000 m2) on the border of the centre as well as the BTD (8,205 m2) in the Upper South zone (Mokotów). After a fall in the activity in the second quarter, increasing demand has been recorded in the last three months. Leases were concluded for almost 153,000 m2 in total.
"The biggest transaction on the market was the lease agreement renegotiation by Pekao S.A. in the Lipowy Office Park (38,450 m2) just two years after the agreement was signed" – says Paweł Skałba, a Partner at the Commercial Space Dept. of Colliers International. "The biggest new deal was finalised by the Aviva Group, which decided to lease 13,050 m2 at the fourth stage of the Platinium Business Park" – he adds.
Agreement renegotiations and renewals still represented a high proportion (35%) of the market activity. However, the share of pre-lease agreements climbed to 14.8%. In comparison, such transactions represented only 2.3% of the total activity in the second quarter.
The vacancy rate in Warsaw stayed at the same level as in the second quarter (8%). What did improve slightly, however, was the availability of space in the city centre, while the vacancy rate shrunk in districts away from it. This was due to several tenants moving from the city centre to other districts (particularly Mokotów).
In 2010, rents remained almost unchanged. The asking rates in the centre of Warsaw range from EUR 18 to EUR 25 per m2. Outside the centre, the rates are much lower, varying from EUR 12 to EUR 16/m2 in the majority of buildings in Mokotów and Ochota. Slightly better rates are offered at buildings located close to the centre. The tenants can still count on reductions, particularly when they sign pre-lease agreements.
"In the coming months, the situation on the Warsaw office space market should remain stable and advantageous to the tenants" – says Robert Karniewski, a Partner at the Office Space Dept. of Colliers International. "However, taking into account the high demand and the few projects entering the construction phase, we can expect a drop in the availability of space, which, in turn, will contribute to the situation changing in favour of the landlords in Q3/Q4 2011" – he emphasises.
REGIONAL MARKETS
On regional markets, the third quarter saw a continuation of the positive trends already observed in the first half of the year. What was particularly noteworthy was the increase in tenants' activity. This revival is also contributing to a growing activity of developers, who are initiating new office projects.
In the third quarter, some 43,000 m2 of modern offices were commissioned, of which the most, 17,500 m2, were added in the Krakow market. The largest completed buildings were the Oxygen office block (14,000 m2) built by Echo Investment in Szczecin and the first building (12,000 m2) forming part of the Krakow Quattro Business Park erected by the Buma Group.
At the end of the third quarter, almost 65,000 m2 was under construction and scheduled for commissioning in the fourth quarter of 2010, as well as over 250,000 m2 to be completed in 2011-2012 in the major and minor regional markets.
"The past quarter was characterised by a high activity of the tenants" – said Marek Ciunowicz, Partner at the Office Space Dept. of Colliers International. "The most popular city was Krakow, where inter alia another significant pre-lease agreement of this year was signed for space in the Green Office development constructed by the Buma Group" – he explained.
What should be noted is the significant share of new agreements in the overall activity of tenants observed in the third quarter.
The vacancy rate dropped in all main markets, with the exception of the Tri-City (Gdańsk, Gdynia, Sopot), where a new, not yet commercialised development was commissioned. Wrocław remains the location with the least available space among the six major regional markets. Although the vacancy rate dropped slightly as a result of new lease agreements signed in the third quarter in Łódź and Katowice, these cities remain the ones with the highest rates of vacant space.
Asking rents in regional cities range from EUR 12 to EUR 15 per m2. At the best locations, they reach EUR 16/m2. Average rents in Łódź and Katowice are among the lowest, at EUR 12 – EUR 13 per m2.
"The next few months should not bring major changes to regional markets. Just as in Warsaw, the situation will remain stable and favourable to tenants on markets with a lot of space available" – says Marcin Kania, a Partner at the Office Space Dept. of Colliers International. "In the case of Wrocław, tenants interested in larger modules will have to wait until new buildings are completed".
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