H1 2013 WARSAW - Knight Frank€¦ · Market overview Poland remains one of the best performing...
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Research H1 2013 WARSAW Office market report Highlights • Office take-up remained strong in H1 2013, having reached 334,000 sq m, a 12% increase year-on-year. Renegotiations and renewals continued to play a large part in market activity. • There continues to be significant development activity in Warsaw. Some 150,000 sq m of new space was completed in H1 2013, with an additional c. 180,000 sq m of largely speculative office space under construction and due for completion in H2. • Despite strong levels of tenant demand, the large amounts of development activity in the Warsaw office market have put upward pressure on vacancy rates, which increased from 10.8% at the end of 2012 to 12.4% at mid-2013. • Although asking rents for prime space remain relatively stable, at €24.50 per sq m per month, net effective rents continue to decline, primarily due to greater incentives offered by landlords.
Transcript of H1 2013 WARSAW - Knight Frank€¦ · Market overview Poland remains one of the best performing...
Research
H1 2013
WARSAW Office market report
Highlights• Office take-up remained strong in H1 2013, having reached 334,000 sq m,
a 12% increase year-on-year. Renegotiations and renewals continued to play a large
part in market activity.
• There continues to be significant development activity in Warsaw. Some 150,000 sq m
of new space was completed in H1 2013, with an additional c. 180,000 sq m of largely
speculative office space under construction and due for completion in H2.
• Despite strong levels of tenant demand, the large amounts of development activity
in the Warsaw office market have put upward pressure on vacancy rates, which
increased from 10.8% at the end of 2012 to 12.4% at mid-2013.
• Although asking rents for prime space remain relatively stable, at €24.50 per sq m
per month, net effective rents continue to decline, primarily due to greater incentives
offered by landlords.
H1 2013WarsawOffice market report
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Table 1
Major leasing transactions signed in H1 2013
Property Submarket Tenant Size (sq m) Transaction type
Sector
Ochota Office Park Ochota The Office for Registration of Medicinal Products
13,000 new Public
Trinity Park II Mokotów BNP Paribas 11,000 renewal Banking, insurance and investment
Marynarska Business Park Mokotów Play 9,570 expansion/renewal IT products & services
New Konsalnet HQ Wola Konsalnet 8,250 pre-let Other
Wiśniowy Business Park F Okęcie Johnson & Johnson 7,250 renewal Manufacturing
Park Rozwoju Mokotów Schneider 6,980 pre-let Energy / Industrial
Eurocentrum Beta Al. Jerozolimskie Unilever 5,410 pre-let Manufacturing
Source: Knight Frank
0
100
200
300
400
500
600
700
0
4
8
12
16
20
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
H1
2013
Figure 1
Warsaw office take-up and vacancy rate000s sq m %
Source: Knight Frank
Take-up Vacancy rate
Market overviewPoland remains one of the best performing economies in Europe. Despite a sharp slowdown in growth to 0.5% in the first quarter, GDP growth is expected to rise to 0.8% in the second quarter and is forecast to reach 0.9% for the whole of 2013. A stronger pace of growth is forecast for 2014, partly due to a more robust Eurozone economy and increased exports.
Demand for office space in Warsaw continues to be strong, with take-up during H1 2013 reaching 334,000 sq m. This was some 12% up on H1 2012, placing the market on track to have another strong level of annual take-up, similar to 2012’s record high of 608,000 sq m. Renegotiations and renewals have continued to be a major driver of occupier activity, accounting for nearly a third of total take-up. Similar to previous years, most of the space leased was outside of the main CBD area, as occupiers sought more cost-effective space.
The two largest deals of H1 2013 occurred outside the CBD, with The Office for Registration of Medicinal Products agreeing to take 13,000 sq m at Ochota Office Park, in the Al. Jerozolimskie district, while BNP Paribas renewed for 11,000 sq m at Trinity Park II in Mokotów.
There continue to be a high level of development activity in Warsaw, with
c.150,000 sq m of new space delivered in the first half of 2013 and another c.180,000 sq m expected in H2. The city’s total supply of modern office space stands at 3.29 million sq m and is expected to rise significantly over the next 18 months, with more than 400,000 sq m expected to be completed by the end of 2014.
Primarily as a result of the increased development activity, vacancy rates have risen in all key submarkets, with the exception of Wola. Notably, the Al. Jerozolimskie district has seen a marked increase in vacant space over the first half, with the vacancy rate soaring from 12.4% to 18.5%. The overall office vacancy rate rose considerably, from 10.8% at the end of 2012 to 12.4% during H1. With a relatively large amount of space under construction and due for completion in H2 2013 and 2014, vacancy rates may face further upward pressure.
The first half of 2013 has seen little movement in office rents. Prime office rents remain relatively stable at €24.50 per sq m per month, while rents in non-central locations are in the €13-17 per sq m per month range. Future rental growth will likely be constrained by the sizeable development pipeline, and there are signs that developers and landlords are more willing to negotiate lease terms and offer enhanced rental incentives in order to entice potential tenants.
Renegotiations and renewals continue to be a major driver of occupier activity.
Łomianki
Bielany
Białołęka
Targówek
Praga PłBemowo
Mokotów
Śródmieście
Żoliborz
Ożarów
Pruszków
Janki
Piaseczno
Port LotniczyWarszawa Okęcie
Józefosław
Ursynów
Ursus
Włochy
Ochota
Wola
www.knightfrank.com
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Mokotów (incl. Służewiec Przemysłowy)
Warsaw region
Zajezdniatramajowa,Mokotów
Marynarska
Woronicza
Rodz
iny
Wirazow
a
Al. Wilanowska
Konstruktorska
Domaniewska
Suw
ak
Woł
oska
Służewiec
His
zpań
skic
h
Warsaw CBD
Prosta
Ności
Wolska
Al. Prymasa Tysiącllecia
Górczewska
Al. Solidar
Wolska
Palace of Cultureand Science
OgródSaski
WARSZAWACENTRALNA
Praga
Mariensztat
Powisle
Mirów
Al. Jana Pawla II
Marszalkow
ska Al. Jerozolimskie
Prosta Świetokrzyska
Al. Ujazdow
skie
Wola
KASPRZAKA
Warszawa
ZachodniaWarszawa
Zachodnia
Prosta
Ności
Wolska
Al. Prymasa Tysiąclecia
Górczewska
Wolska
Al. Solidar
Al. Jerozolimskie
Prosta
Ności
Wolska
Al. Prymasa Tysiącllecia
Górczewska
Al. Solidar
Wolska
Wiktoryn
Warszawa
Zachodnia
ParkSzczesliwicki
Szczesliwicki
Ochota
Al. Jero
zolim
skie
Grój
ecka
Grzymały
4
0
200
400
600
800
1,000
1,200
1,400
CBD Al.
Jero
zolim
skie
Mok
otów
(inc
l. Sł
u�ew
iec
Prze
mys
łow
y)
Wol
a
Oth
er
Figure 4
New supply by location000s sq m
Source: Knight Frank
0
5
10
15
20
25
30
35
40
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
H1
2013
Figure 2
Prime office rents€ per sq m per month
Source: Knight Frank
Figure 3
Submarket vacancy rates%
0
5
10
15
20
25
to end 2003 2004 2005 2006
2007 2008 2009 2010
CBD Al.
Jero
zolim
skie
Mok
otów
(Incl
. Służe
wie
c Pr
zem
syło
wy)
Wol
a
Oth
er
Source: Knight Frank
International investors continue to drive the market.
Investment marketFollowing a strong performance in 2012,
when some €2.72 billion was invested
in Polish commercial property, activity
has tempered in the first half of 2013,
with transaction volumes totalling
€1.05 billion. However, investor sentiment
remains positive and international investors
continue to drive the market. Apart from
Warsaw-based Kulcyzk Silverstein Properties,
the most active buyers were American and
German investors such as Hines, RREEF Real
Estate and Union Investment.
Hines Global REIT completed the largest office
deal in H1 with its acquisition of the 44,700
sq m New City office complex in Warsaw. The
property was purchased from ECI Group for
€127 million. The only other deal to break the
€100 million barrier was completed by Union
Investment with the purchase of the Senator
office new build in Warsaw for €120 million.
Prime office yields were stable at 6.25%
during H1 2013, with no large shifts expected
over the short term. Current yields continue to
offer relatively good value in comparison with
their 2007 peak of 5.50%, against their high
point of 7.50% in 2009.
Table 2
Key office investment transactions in H1 2013
Property Vendor Purchaser Size (sq m) Price (€m)
New City ECI Group Hines Global REIT 44,700 127
Senator Ghelamco Union Investment Real Estate
25,550 120
Green Corner Skanska RREEF Investment 27,000 90
Holland Park CBRE Global Investors Kulczyk Silverstein Properties
11,800 50
Ochota Office Park Mahler Project International
Adgar Investment 40,000 36
Source: Knight Frank
to end 2003 2004 2005 2006 2007 2008
2009 2010 2011 2012 H1 2013
2004 2005
2006 2007
2008 2009
2010 2011
2012 H1 2013
H1 2013WarsawOffice market report
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Table 3
H1 2013 Figures
Area Prime rent (€ per sq m per month)
Stock (sq m)1
Vacancy rate (%)2
Vacant space (sq m)
CBD 24.50 1,057,629 12.3 130,314
Mokotów (incl. Służewiec Przemysłowy) 15.10 1,051,614 10.3 108,507
Wola 17.20 194,983 8.4 16,394
Al. Jerozolimskie 15.60 356,853 18.5 66,139
Other 17.20 636,319 13.6 86,604
Warsaw total 16.90 3,297,398 12.4 407,9581 Excluding owner occupied stock 2 Vacancy rates reflect vacant space in leasable office premises, excluding owner occupied stock Source: Knight Frank
Figure 5
Offices under construction by submarket and completion date000s sq m
4
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6
7
8
9
10
11
2002
2003
2004
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2011
2012
H1
2013
Figure 6
Prime office yields%
Source: Knight Frank
0
1
2
3
4
5
620
05
2006
2007
2008
2009
2010
2011
2012
H1
2013
Figure 7
Poland commercial property investment volumes€bn
Source: Knight Frank
Trinity Park III
Plac Bankowy
0
100
200
300
400
500
600
700
War
saw
tota
l
CBD
Al. J
eroz
olim
skie
Mok
otów
(inc
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u�ew
iec
Prze
mys
łow
y)
Wol
a
Oth
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Poland data
Poland population 38.5m
Warsaw metropolitan area population
2.7m
Poland GDP growth 2013 (forecast)
0.9%
Poland inflation rate 0.5%
Poland unemployment rate 10.8%
Poland National Bank Reference rate
2.50%
PLN/EUR exchange rate 4.33
PLN/USD exchange rate 3.32Source: Poland Statistical Office/National Bank of Poland/OECD/OANDA. June 2013 data quoted unless otherwise stated.
H2 2013 2014 2015 2016
Source: Knight Frank
RESEARCH
Warsaw Joseph BorowskiManaging Partner +48 (22) 596 50 50 [email protected]
Monika A. DebskaChairman of the Board +48 (22) 596 50 50 [email protected]
Magdalena CzempińskaResearch +48 (22) 596 50 50 [email protected]
LondonChris BellManaging Director, Europe+44 (0) 207 629 [email protected]
Darren YatesPartner, International Research+44 (0) 207 629 [email protected]
Matthew ColbourneAssociate, International Research+44 (0) 207 629 [email protected]
Christopher BabatopeAnalyst, International Research+44 (0) 207 629 [email protected]
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© Knight Frank LLP 2013
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